The reasons are as diverse as the government tasks: New vehicles in public transport, the re-municipalisation of electricity and gas supply, the reconstruction/new construction of hospitals and care facilities due to new legal requirements, and debt restructuring and reorganisation of public business entities in general. At the same time, debt financing has become more difficult. The financial crisis, Basel II and III, weak margins in municipal-related business and stricter EU state aid requirements have led to restraint and higher lending requirements by banks. Loan volumes of 50 million euros or more are regularly only granted jointly by several banks by way of so-called club deals or as syndicated loans. The increase in syndicated financing and syndication of loan receivables in turn entails more complex contractual structures (LMA standard) and negotiation situations with several syndicate partners as well as a more thorough risk assessment on the part of the banks. In addition, new financing must be harmonised with existing financing in terms of maturity, structure and debt service, among other things.
Public business entities are often only prepared to a limited extent in terms of personnel and expertise for new bank requirements such as detailed profit and investment planning, the examination of debt service capability, reporting obligations, compliance with covenants and waiver procedures. They also often underestimate the time it takes to conclude and disburse financing. By the same token, banks are not yet fully familiar with specific problems with, and approaches to, financing public business entities. This applies, for example, to the assessment of the state aid compatibility of guarantees and acts of entrustment by the shareholder (state/municipality) as well as of profit and loss pooling agreements as a basis for financing. This also applies to the requirements under municipal supervisory and regulatory law.
Head of Public Sector
KPMG AG Wirtschaftsprüfungsgesellschaft
KPMG provides public business entities and banks with an interdisciplinary financing team of bankers and lawyers for financing, state aid and municipal law issues. Depending on your particular needs and the scope of your financing project, we support you in selecting the right partner, examining individual legal issues/legal opinions and refinancing options through development banks, as well as in negotiating and documenting the financing.