Karl ERJAVEC

Minister za zunanje zadeve Republike Slovenije

Prešernova cesta 25

SI-1001 Ljubljana Commission européenne, B-1049 Bruxelles – Belgique Europese Commissie, B-1049 Brussel – België Telefon: 00-32 (0) 2 299 11.11.

EUROPEAN COMMISSION

Brussels, 27.4.2017

C(2017)2627 final

PUBLIC VERSION

This document is made available for

information purposes only.

Subject: State Aid SA.37316 (2015/FC) – Slovenia

Complaint on alleged unlawful State Aid to T-2 d.o.o.

Sir,

I. PROCEDURE

(1) On 28 August 2013, a complaint1 was lodged with the Commission alleging that the

Republic of Slovenia ("Slovenia") granted unlawful State aid to the Slovenian

telecommunications company T-2 d.o.o. ("T-2"). On 11 September 2013, the

Commission forwarded a non-confidential version of the complaint to Slovenia.

Comments on the complaint were sent on 8 October 2013.

(2) The services of the Commission met with the complainant's representatives on 22

January 2014. On 28 January 2014 the Commission wrote to the complainant

informing it that Slovenia had stated that no State aid had been provided to T-2 and

attaching to its letter a non-confidential version of Slovenia's reply of 8 October 2013.

(3) On 13 February 2014, the Commission sent a question list to the Slovenian authorities

to which Slovenia replied on 12 March 2014. On 15 April 2014, a non-confidential

version of that reply was forwarded to the complainant. The complainant provided

additional information on 28 February 2014, which was forwarded for information

1 The complainant asked the Commission not to reveal its identity.

2

purposes to the Slovenian authorities on 2 April 2014. On 19 May 2014 and 20 June

2014, the Commission received new written submissions from the complainant.

(4) On the basis of an initial examination and review of documents and information made

available, the Commission sent a first preliminary assessment letter to the

complainant on 1 July 2014 stating that the measure objected to a priori did not

appear to constitute State aid within the meaning of Article 107(1) of the Treaty of

the Functioning of the European Union ("TFEU").

(5) The complainant rejected that conclusion by letter dated 1 August 2014. The

Commission services met again with the complainant's representatives on 10

December 2014.

(6) On 15 January 2015, the Commission sent a second preliminary assessment letter

repeating that the measures did not appear to constitute State aid. The complainant

responded on 13 February 2015 and rejected the Commission's preliminary

conclusion2.

(7) The complainant sent additional correspondence on 29 October 2015 and the

Commission met with the complainant on 26 January 2016.

(8) At the request of the Commission, the Slovenian authorities provided additional

information on 9 August 2016 and 17 August 2016. The complainant updated the

Commission in respect of recent developments (in particular on the Slovenian

telecommunications market) during a teleconference on 22 November 2016.

(9) By letter dated 7 March 2017, Slovenia exceptionally agreed to waive its rights

deriving from Article 342 of the Treaty on the Functioning of the European Union

("TFEU") in conjunction with Article 3 of Regulation 1/19583 and to have the present

decision adopted in English.

II. BACKGROUND

1. The alleged beneficiary

(10) T-2 is a Slovenian company providing telecommunications services in Slovenia. The

company was established in 2004 by Zvon ena Holding, an investment fund

controlled by Gospodarstvo rast d.o.o., and started to provide telecommunications

services on 1 October 2005. According to its own figures, T-2 captured a 6% market

share in broadband access, a 2% market share in the fixed telephony segment and a

3% market share in cable television in its first year of service.

(11) T-2's shareholder structure frequently changed between 2006-2011, as T-2 was

recapitalised a number of times over that period. In 2006, Zvon ena Holding owned

2 In that letter, the company also suggested that there also seemed to be a tax measure in favour of T-2 By

e-mail of 22 November 2016, the complainant clarified the scope of his complaint saying that "[t]he issue

on taxes, however, should not be subject to the Commission’s decision, but should moreover serve as sole

background information" . 3 Regulation No 1 determining the languages to be used by the European Economic Community, OJ 17,

6.10.1958, p. 385

3

51%, while Gosposdarstvo rast owned 42%, the remainder being held by other

investors. In 2011 (immediately prior to the compulsory settlement which is described

in recitals (21) to (26)), Zvon ena Holding owned 95.19%4 of T-2.

2. The alleged State aid measures

(12) The complainant claims that T-2 received State aid under the following three

different forms:

(a) part of a loan5 to T-2 at preferential conditions by the "Syndicate Banks"

(which are described in more detail in recital (13)) provided on 16 April 2007

(“the T-2 loan”);

(b) ineffective debt recovery, as the Syndicate Banks showed a lack of

willingness to recover the debt from T-2 once it became apparent that T-2

would have difficulties repaying the loan; on 16 February 2012, in the

framework of a compulsory settlement procedure, T-2's debt6 was written

down to 44% of its initial nominal value (“the compulsory settlement

procedure”); and

(c) a number of loans by certain banks among the Syndicate Banks to certain T-2

shareholders (to support T-2) at preferential conditions, hence indirectly

benefitting T-2, provided on several dates (“the loans to T-2's

shareholders”).

(13) The following banks participated in the consortium of banks that allegedly provided

preferential treatment to T-2 ("Syndicate Banks"):

Nova Ljubljanska banka d.d. ("NLB") is a joint stock company and the lead

bank within the Syndicate Banks. On 31 December 2006, Slovenia held 45.47%7

of the share capital of NLB (35.41% directly and 5.05% and 5.01% indirectly via

two 100% State owned companies KAD8 and SOD9), while the other strategic

shareholder - the Belgian listed bank KBC - held 34%. In 2008, the respective

stakes of Slovenia and KBC dropped marginally to 43.16% and 30.57% - the

shareholding structure did not change until March 2011. At that point, Slovenia

4 Smaller stakes were held by Finetol, Krekova Druzba Za Storitve and I.J. Storitve In previous years, also

Zvon dva Holding – a company related to Zvon ena Holding - was a shareholder of T-2; both companies

were owned by the Maribor Archdiocesan. 5 The total loan amounted to EUR 120 million, of which EUR 108 million was provided by Syndicated

Banks which according to the complainant were controlled by the Slovenian State. The remainder of the

loan (i.e. EUR 12 million) was provided by privately-owned Hypo Alpe-Adria-Bank.

6 Also the loan of the Syndicated banks was impacted by the compulsory settlement procedure for the part

of the loan (i.e. EUR 69.7 million) which was deemed to exceed the value of the collateral.

7 All figures related to shareholder structures in this recital are taken from the respective annual reports.

8 Kapitalska druzba pokojninskega in invalidskega zavarovanja, dd. ("KAD") is a joint stock company

whose sole shareholder is Slovenia. KAD manages state pension funds and assets for Slovenia. It is also

responsible for the privatisation of state owned assets. 9 Slovenska odskodninska druzba d.d. ("SOD") is a 100% State owned company.

4

subscribed to a capital increase of EUR 250 million10, which resulted in an

increase of Slovenia's stake to 53.72%11. After the capital increase, KBC's stake

dropped to 25%. In 2002, the European Bank for Reconstruction and

Development (EBRD) acquired a 5% shareholding which it sold in 2008.

Nova Kreditna Banka Maribor d.d. ("NKBM") is a joint stock company which

at the end of 2006 had the following shareholder structure: Slovenia 90.41%,

KAD 4.79% and SOD 4.79%. NKBM has been listed on the stock market since

10 December 2007. Slovenia (directly and indirectly via KAD and SOD) held just

over 51% of the share capital of NKBM between 2007 - 2011. Other shares were

in the hands of retail and institutional investors (both domestic and

international12).

NLB Banka Domzale d.d. and NLB Banka Zasavje d.d. are joint stock

companies, which were both originally wholly-owned subsidiaries of NLB before

they merged with NLB in 2008;

LHB Aktiengesellschaft ("LHB AG") is a joint stock company in which NLB

owned an 81.02% stake in 2007. In 2009, NLB became the 100% owner of the

company;

Banka Celje d.d (merged with Abanka in 2015) is a joint stock company, in

which NLB held a 40.99% stake of the share capital in the period 2007 – 201313.

Over the same period, Slovenia had a direct holding of 9.36% of Banka Celje's

share capital.

Hypo Alpe-Adria-Bank d.d. is a privately owned bank where neither the

Slovenian State nor NLB are present in the ownership structure.

i. The T-2 loan

(14) The loan agreement between the Syndicate Banks and T-2 is dated 16 April 2007.

The purpose of the EUR 120 million loan to T-2 was mainly to finance the

construction of a fixed Very-high-bit-rate Digital Subscriber Line (VDSL) optical

network, and a mobile UMTS/IMT-2000 network.

10

This capital increase was approved as rescue aid by Commission Decision of 7 March 2011 on State aid

SA.32261, OJ C 189, 29.06.2011, p.2 and as restructuring aid by Commission Decision of 18 December

2013 on State aid SA.33229, OJ L 246, 21.08.2014, p.28. 11

45.62% directly and 4.07% and 4.03% via KAD and SOD. 12

The 2007 annual report mentioned that Citigroup Global Markets Ltd held 2.71%, Julius Baer

International Equity Fund 1.13% and East Capital Balkan Fund 0.89%. 13

NKBM also acquired a 2.67% stake in 2010.

5

(15) Table 1 illustrates the amount lent to T-2 via the Syndicate Banks and the respective

percentages:

Table 1 Actual amount

(EUR Millions)

% of the total

loan

NLB 50 41.67%

NKBM 20 16.66%

LHB 20 16.66%

Hypo Alpe-Adria-Bank 12 10.00%

Banka Celje 8 6.67%

NLB Banka Domžale 5 4.17%

NLB Banka Zasavje 5 4.17%

TOTAL 120 100.00%

(16) The loan agreement provides that NLB should act as the Organiser and Agent on

behalf of the Syndicate Banks. In accordance with the loan agreement, the Syndicate

Banks had equal status to NLB in respect of exercising their rights. In line with

common market practice, the role of Agent did not include the power to determine the

pricing and conditions of the loan on behalf of the other banks within the Syndicate

Banks.

(17) The loan conditions at the start of the loan provided that T-2 had to pay an interest

rate on the loan of 6 month Euribor14 + 1.15%15.

(18) Under the terms of the loan agreement, T-2 committed to repay the loan in 14 bi-

annual instalments of EUR 8,571,428.57. The loan agreement included a 24-month

moratorium which started on the date the loan was signed. The first instalment

payment date was 1 November 2009 and the last 1 May 2016.

(19) At the end of April 2009, interest on the loan became payable. However, T-2 asked

to defer the payment of interest and to restructure the entire loan. The Syndicate

Banks agreed to this request. The maturity of the first payment of the loan was

deferred to 5 March 2010 and the final payment instalment date was extended to 2

November 2016. The interest margin was increased from 1.15% to a basic margin of

3.5% per annum.

(20) The loan agreement provided that the collateral in respect of the loan includes 20

blank bills of exchange, establishment of liens on the existing networks, an

uninterrupted series of contracts on the establishment of property rights in connection

with the network and liens on the monies on T-2's account (or receivables due from

the bank) which arise from the funds on T-2's account. The loan agreement also

provided that every 31 March and 30 September in the year, T-2 had to create a lien

14

Euro Interbank Offered Rate. 15 Following receipt of the T-2's 2008 accounting statements, the interest margin was to be adjusted in

accordance with the ratio of net debt (where subordinated shareholder loans are not included in net debt)

to EBITDA (Value R), as follows: ratio R below 3: 1% margin; ratio R between 3 and 4: 1.15% margin;

ratio R between 4 and 6 1.35% margin; ratio R above 7 -1.70% margin.

6

in favour of the Syndicate Banks on the New Network16. For that purpose, a detailed

framework contract on how to pledge immovable and movable property was agreed

upon as Annex VI of the loan agreement.

ii. The compulsory settlement procedure

(21) On 17 September 2010, Telekom Slovenije d.d, a State-controlled

telecommunications company, and creditor and competitor of T-2, filed a request to

initiate bankruptcy proceedings17 against T-218.

(22) However, on 30 December 2010, T-2 filed a proposal for preliminary bankruptcy

proceedings to be interrupted, so that compulsory settlement proceedings could be

initiated19. T-2 pursued compulsory settlement to avoid bankruptcy proceedings and

to persuade its creditors to agree to a restructuring of its debts. The District Court in

Maribor accepted T-2's proposal, hence compulsory settlement proceedings were

instigated on 13 January 2011.

(23) In order to progress with compulsory settlement proceedings, T-2 as a debtor had to

prepare a Financial Restructuring Plan (FRP) pursuant to Article 145 of the Slovenian

Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act

("ZFPPIPP"). In April 2011, T-2 presented an amended Financial Restructuring Plan

("aFRP")20. The aFRP21 differed from the initial FRP, as a number of secured creditors

such as the Syndicate Banks were no longer considered to be secured in full. Part of

their claim was indeed considered to be unsecured. As part of the aFRP, T-2 proposed

to its unsecured creditors that:

16

In the definition chapter of the loan agreement, "New Networks" are defined as "all movable and

immovable property and rights and investments in construction … representing each respective a

complete functional whole of the Network, financed by the loan in whole or in part … A part of the

Network is considered to become a functional unit when the Subscribers or Network Lessees are able to

use that part of the Network."

17 This procedure is where the debtor or creditor files a petition to declare that a person or business is

insolvent. If a compulsory petition is filed, the court can order the compulsory administration of a

bankrupt's affairs so that his assets can be fairly distributed among his creditors. 18

T-2 allegedly owed Telekom Slovenije more than EUR 12 million (EUR 10.4 million directly and EUR

2.5 million via its subsidiary Mobitel). 19

To ensure the progression of compulsory settlement proceedings, the debtor must disclose its financial

position to creditors– this includes a financial restructuring plan ("FRP") which is certified by an

independent business valuer. The role of the business valuer is to assess whether the compulsory

settlement proposed by the debtor will guarantee creditors more favourable conditions for the payment of

claims when compared to bankruptcy proceedings. During the compulsory settlement proceedings itself,

the creditors decide on whether the compulsory settlement should be adopted by issuing votes. A

compulsory settlement will be adopted if it is voted for by creditors representing more than 60% of all

weighted claims by creditors with voting rights. 20

Banka Celje appealed against the order allowing the aFRP but on 7 July 2011, the Higher Court of

Ljubljana concluded that Banka Celje's appeal was unfounded.

21 In its aFRP, T-2 forecasted sales to grow by an annual average growth rate of 10.7 % in the period 2010-

2020 and it assumes that it will gradually – by 2020 – achieve a 33.8% EBITDA-margin. Macro-

economically, following negative GDP growth of -8.1% in 2009, Slovenia was expected to show positive

growth of 1.2%, 1.9% and 2.5% in respectively 2010, 2011 and 2012 (source:

http://ec.europa.eu/economy_finance/publications/european_economy/2011/pdf/ee-2011-1_en.pdf).

7

(i) only 44% of their claims would be paid;

(ii) the payment would occur within 9 years from the date of approval of the

compulsory settlement; and

(iii) there would be no interest due.

(24) Further to the procedure outlined in the ZFPPIPP, the independent certified business

valuer Audit-IN d.o.o analysed T-2's aFRP to determine whether creditors would be

better off under compulsory settlement procedures as opposed to a bankruptcy

procedure. In its report of 28 April 2011, the business valuer concluded that in the

event of bankruptcy proceedings, unsecured creditors would receive 27.87% of the

repayment liabilities22, while this amount would increase to 29.44% in the event of

compulsory settlement proceedings.23 The valuer took into account the above

calculations and concluded that there was at least a 50% probability that the

compulsory settlement procedure would guarantee T-2's creditors more favourable

conditions than bankruptcy proceedings.

(25) On 13 July 2011, the District Court of Maribor invited creditors to vote on the

adoption of the compulsory settlement. In the end, the sum of the weighted amounts

of the creditors who reported their claims and voted to adopt compulsory settlement

proceedings was equal to 75.46%24. Telekom Slovenije d.d. and its subsidiary Mobitel

d.d. voted against the compulsory settlement.

(26) By Order of 28 November 2011, the District Court of Maribor confirmed the

compulsory settlement.25As part of the same procedure, the District Court of Maribor

also dismissed Telekom Slovenije's objection to the instigation of compulsory

settlement proceedings and confirmed that following the procedures set out under

Slovenian law, there was a probability of more than 50% that unsecured creditors

would be better off in a compulsory settlement scenario than in a bankruptcy

scenario. Moreover, the Court also concluded that there was a probability of more

than 50% that T-2 would restore its short-term and long-term solvency as a result of

the restructuring.26

22

Assuming that the assets would be gradually monetized over a period of 5 years. The figures broadly

coincided with the figures of 28.50% (bankruptcy) and 30.77% (compulsory settlement procedure) that T-

2 had forecast as part of its aFRP. 23

Both percentages are expressed in net present value terms. In order to make the comparison between the

bankruptcy scenario, the independent certified business valuer took into account the cash flows

concerned, the discount rate as foreseen in Slovenian legislation and costs associated to the bankrupt

company. 24

Based on information from Slovenia, the sum of the weighted amounts of the claims of creditors who

voted to adopt compulsory settlement was EUR 104,543,402.16; that the basis for the calculation of the

proportion of voting rights (i.e. the sum of the weighted amounts of all recognised and established claims

of the creditors) was EUR 138,537,237.95. 25

In its Order, the District Court of Maribor noted that the obligations of the debtor would not end with the

order confirming the compulsory settlement. Art 40 ZFPPIPP provides that T-2 will be obliged to draw

up, for each calendar quarter, a report on the implementation of financial restructuring measures (…).

Failure to meet this obligation gives rise to the presumption of insolvency. 26

As foreseen in Article 146 ZFPPIPP. When making the analysis that T-2 would be solvent, the District

Court of Maribor also took into account that three creditors i.e. Gratel, Lokainvest and Garnol had stated

that they would convert their claims into equity.

8

(27) On 13 December 2011, Telekom Slovenije appealed the Order of the District Court

of Maribor. However, on 16 February 2012, the Higher Court of Ljubljana concluded

that the appeal was unfounded.

(28) Meanwhile NLB and NKBM transferred their loan to T-2 to the State-owned asset

management company Dutb as part of State measures implemented to support

recapitalisation of the national banking sector27. In September 2014, Dutb filed a

proposal for bankruptcy at the District Court of Ljubljana.28

iii. The loans to T-2’s shareholders

(29) The complainant alleges that between 2006 and 2011, NLB, NKBM and Banka

Celje provided loans to T-2's shareholders Zvon ena Holding, Zvon dva Holding,

Finetol and I.J. Storitve to ensure T-2 would be supported, hence resulting in T-2

being an indirect beneficiary of the loans. According to the complainant, these loans

were intended to ensure that the shareholders could finance the losses generated by T-

2. The complainant mentions amounts of EUR 154,317,025 (Zvon ena Holding) and

EUR 22,826,218 (Zvon dva Holding).

3. NLB – NKBM: corporate governance and credit approval procedures

Legal framework for corporate governance in the banking sector

(30) In Slovenia, the functioning of the Management and Supervisory Boards of banks is

regulated by the Company Act (ZGD-1) and the Banking Act (ZBan).

(31) Supervisory Board members are selected by the bank's shareholders in accordance

with Article 274 of the ZGD-1. In addition, Article 71 of the ZGD-1 provides which

people can and cannot be members of the Supervisory board, Article 72 sets out the

duties for members of the Supervisory Board and Article 74 sets out the different

obligations for members. The Supervisory Boards were also regulated by certain

legislation within Slovenia which includes the Regulation on large exposures of

banks and savings banks29 and the Regulation on risk management and the

implementation of the internal capacity adequacy assessment process for banks and

savings banks30. Article 263 of the ZGD-1 also provided that Supervisory Board

members are bound to act in the best interests of the bank with due diligence and

without the influence of third parties.

27

Approved as restructuring aid to NLB by Commission Decision of 18 December 2013 on State aid

SA.33229, OJ L 246, 21.08.2014, p.28 and as restructuring aid to NKBM by Commission Decision of 18

December on State aid SA.35709, OJ C 120, 23.04.2014, p.3. 28

T-2 appealed against the decision of the District Court of Ljubljana and the Higher Court of Ljubljana

overruled the District Court in October 2014. Consequently the District Court of Ljubljana rejected the

initial action for bankruptcy proceedings against T-2. The creditors of the latter filed an appeal against the

said decision before the Higher Court of Ljubljana in August 2015, which decided that bankruptcy

proceedings should be initiated in the end. A shareholder of T-2 filed a constitutional appeal against this

decision before the Constitutional Court. In November 2015, the Constitutional Court overruled the

Higher Court of Ljubljana. Subsequently, the Higher Court of Ljubljana re-initiated bankruptcy

proceedings and a shareholder of T-2 filed again a constitutional appeal. The Constitutional Court

temporarily suspended the bankruptcy procedure in May 2016 and stopped it on 22 March 2017. 29

Official Gazette of the Republic of Slovenia Nos. 135/2006, 104/2007, 85/2010 and 34/2011 30

Official Gazette of the Republic of Slovenia Nos 135/2006, 28/2007, 104/2007, 85/2010, 62/2011,

3/2013, 38/2013, 60/2013, 74/2013

9

NLB: corporate governance and credit procedures

(32) On 8 May 2002, the Belgian listed bank KBC acquired 34% of NLB and entered

into a shareholders agreement with the Slovenian State, KAD and SOD to jointly

control NLB31. KBC maintained this involvement until 2012 when it divested its

shares.

(33) As regards the composition of the Supervisory Board, point 3.3 of the shareholders

agreement provides that:

3.3. … each shareholder shall vote its shares and take any other actions

necessary to cause the Supervisory Board to consist of 11 members elected

by the General Meeting (of shareholders) of whom:

3.3.1 … four individuals shall be designated by the Investor32.

3.3.2 … four individuals shall be designated jointly by Slovenia, KAD and

SOD, provided that Slovenia, KAD and SOD hold together at least 25% of

all shares

…

3.3.7. … the remaining 2 individuals (or three individuals if EBRD does not

purchase shares) shall be Professionals33; the shareholders shall jointly

designate such professionals who shall be elected by the General Meeting34:

(34) As regards the composition and the functioning of the Management Board, the

shareholders agreement provides that:

7.1 … parties to the agreement will undertake to each other to use their best efforts to

procure that NLB shall be managed by the Management Board consisting of 3 to 5

Members, one of which to be appointed at the proposal of KBC35.

7.1.2 … NLB shall not, unless so decided by the consent of all Management Board

members or, in the absence of such consent, unless a consent of Supervisory Board is

given: …

7.1.2.2. approve exposures to single clients .. exceeding 30 million EUR

(35) The shareholders agreement also provides – in point 7.1.5 and 7.1.6 - that parties to

the agreement undertake to each other to use their best efforts to procure that NLB

shall:

"- carry on and conduct its business and affairs in a proper and efficient manner and

for its own benefit …

31

In 2002, the Republic of Slovenia was a direct holder of 35.41% of the share capital of NLB and an

indirect holder of 10.06% of the share capital of NLB through KAD and SOD. 32

The Investor refers to KBC

33 The shareholders' agreement defines Professionals as 'any Person, who has at least 3 years of experience

in banking, insurance, asset management or corporate finance; 34

Article 3.4 of the shareholders agreement provides that 'if not all 11 members are designated by the

shareholders in accordance with the above provisions (i.e. the provisions of 3.3), the Supervisory Board

shall have the right to designate the remaining individuals. 35

Point 7.1.1 of the shareholders agreement

10

- transact all its business on terms no less favourable to NLB than arm's length terms

…."

In accordance with NLB d.d.'s Management Board Rules of Procedure, the credit

committee's36 mandate was to take decisions on37: (i) the classification and

reclassification of customers; (ii) set maximum borrowing limits; and (iii) approve

commercial banking transactions at meetings.

(36) In 2007, the Supervisory Board had to provide its consent for large lending

transactions if it resulted in a large exposure38

. In addition, Article 167 of the Z-Ban 1

required the Supervisory Board's consent if a legal transaction increased the NLB's

large exposure to the extent it reached or exceeded 15 – 20% of its capital.

(37) NLB's credit committee of 13 March 2007 took a decision on the T-2-loan based on

a report which analysed, inter alia, the telecommunications market, the position of T-

2 in the telecommunications market, the prospects of the telecommunications sector,

the financial position of T2. The Supervisory Board provided its consent to the

decision of the credit committee39.

NKBM: corporate governance and credit procedures

(38) The Supervisory board appointed members of the Management board who in turn

appointed members of the credit committee.

(39) Although the credit committee had the discretion to approve lending, if an

investment had been approved which gave rise to substantial exposure to the bank,

the Supervisory Board (in accordance with the ZBan) was responsible for providing

consent for the lending via the Management Board prior to the conclusion of the loan

agreement with the customer.

(40) The credit committee of 2 April 2007 took a decision on the participation of NKBM

in the Syndicate Banks based on a detailed report which included analysis of the

telecommunications market, the position of T-2 in the telecommunications market

and T-2's financial position. The Supervisory Board also considered the proposal to

grant the loan to T-2 between 4-6 April 2006 and subsequently agreed with the credit

committee's decision.

III. POSITION OF THE COMPLAINANT

1. The T-2 loan

(41) The complainant claims that T-2 received State aid under the loan agreement of

April 2007. According to the complainant, out of the EUR 120 million of the loan,

36

In April 2007, the bank's credit committee consisted of four Management Board members, all of whom

were appointed by the Supervisory Board as it appoints members of the Management board.

37 NLB 2007 Annual report page 57.

38 In the ZBan-1 "large exposure" was defined as exposure of the Bank to an individual that reaches or

exceeds 10% of the bank's capital. 39

As NLB explained in the Slovenian authorities submission dated 19 November 2015.

11

EUR 108 million entailed aid to T-2, i.e. the part of the loan financed by NLB (and

the Syndicate Banks in which NLB had a stake) and NKBM.

(42) The complainant asserts that the measure is imputable to the State arguing that the

authorities – directly or indirectly (via NLB) – influenced the Syndicate Banks, with

the exception of Hypo Alpe Adria Bank as the State does not directly or indirectly

have any shares in that bank. The complainant also relies on press reports which

imply that the Slovenian government discussed NLB's business strategy.

(43) In general, the complainant states that this measure, insofar as it is financed by NLB,

is imputable to the State because (a) Slovenia determined NLB's business strategy;

(b) Slovenia controlled the Supervisory Board which approved loans over EUR 30

million; and (c) NLB could not pursue its loan policy independently without taking

into account Slovenia's requirements.

(44) As regards the shareholder structure of NLB, the complainant is aware of the

shareholders agreement between Slovenia and KBC, but the complainant interprets

point 3.3.2 and 3.3.7 as meaning that Slovenia can still appoint a majority of members

in the Supervisory Board. According to the complainant, KBC was "compelled to

cooperate with Slovenia".

(45) According to the complainant, Slovenia appointed the majority of members on the

Supervisory Board of each bank, referring in this context to "political appointees".

The complaint points in particular to Mr Peter Jesovnik (who was the Deputy

Chairman of the Supervisory Board in NLB, and at the same time acted as the

Director of the Public Agency of the Republic of Slovenia for Entrepreneurship and

Foreign Investments) and to Ms Katja Bozic (who was a member of the Supervisory

Board and at the same time was the Director General of Financial Systems

Directorate at the Ministry of Finance of the Republic of Slovenia).

(46) In addition, the complainant asserts that members of the Management Board of

NLB are State appointees as they are appointed by the Supervisory Board.

(47) As regards NKBM, the complainant argues that Slovenia held 51.89% in NKBM

which allowed it to nominate the Supervisory Board and also the Management Board

indirectly.

(48) The complainant refers to the Commission Decision in Elan40 and notes that

imputability to the State should be found in this present case concerning T-2, as the

Elan case and the current case have similar indicators and sources of evidence. In

addition, the complainant argues that the Syndicate Banks should be defined as a

public undertaking within the meaning of Article 2(b) of Directive 2006/111/EC of 16

November 2006 on the transparency of financial relations between Member States

and Public undertakings as well as on Financial transparency within certain

undertakings ("the Transparency Directive"). The complainant takes the view that

defining the Syndicate Banks as a public undertaking is another indicator which

40

Commission Decision of 19 September 2012 in State aid case SA.26379 – Elan d.o.o., OJ L 144,

15.5.2014, p.1.

12

demonstrates State imputability. The complainant also asserts that the State in this

case is also indirectly imputable, as it is similar to case C-57/86 Bank of Greece41.

(49) The complainant also alleges that the decision of NLB and NKBM to grant a loan to

T-2 involves State resources because NLB and NKBM received substantial financial

support from the State through several financial injections and capital increases42. The

complainant contends that without this State support, those banks within the

Syndicate Banks would not have been able to provide the loan to T-2.

(50) The complainant also states that the loan conferred an advantage on T-2 as it was

provided in circumstances and on terms which commercial lenders would not be

willing to accept; and was therefore not in line with the market economy operator

principle ("MEOP"). In this regard, the complainant points at T-2's financial position

and at the failure of the Syndicate Banks to require proper collateral against the loan

to T-2.

(51) Finally, the complainant claims that the other conditions necessary to conclude that

the loan to T-2 constitutes State aid are met.

2. The compulsory settlement procedure

(52) The complainant claims that the Syndicate Banks should have made more effort to

collect and properly secure the collateral of the loan. It states that T-2, in the

compulsory settlement proceedings, produced a list of security provided to the

Syndicate Banks and obtained a certified valuation of such security, according to

which its market value was EUR 45,032,28143 whereas the liquidation value was EUR

29,594,405. The complaint recalls that under Slovenian law, in order for a mortgage

to become effective, a mere contractual stipulation of a mortgage does not suffice but

registration with the Land Registry is required. The complainant underlines that the

compulsory settlement administrator refused to recognize the existence of collaterals

that had not been registered in the Land Registry (as provided for in Slovenian Law).

(53) Furthermore, the complainant is of the view that the Syndicate Banks did not behave

like a private creditor during the compulsory settlement proceedings. It states that

NLB, in view of the size of its claim and had it not omitted to register its unsecured

claims in the compulsory settlement proceedings, could have prevented and vetoed

the adoption of compulsory settlement. In the complainant's view, this would have

meant that the Syndicate Banks would have pursued bankruptcy proceedings as an

alternative, which would have resulted in the Syndicate Banks being in a much better

financial position in respect of their claim when compared to compulsory settlement

proceedings.

(54) The complainant is of the view that NLB's failure to register the unsecured part of its

claim and its failure to veto compulsory settlement proceedings means that NLB

41

Judgment of the Court of Justice of 7 June 1988 in case C-57/86, Greece v Commission, EU:C:1988:284.

42 Commission decision of 18.12.2013 on State aid SA.33229 (2012/C) (ex 2011/N), OJ L 246, 21.8.2014,

p. 28 and Commission decision of 18.12.2013 on State aid SA.35709 (2012/N), OJ C 162, 07.06. 2013, p.

5. 43

The Slovenian authorities provided information on 8 October 2013 from T-2 and argued that the final

figure in the aFRP was 55,117,528.

13

failed to act as a prudent private creditor. Moreover, the complainant alleges that as

Slovenia owned the majority of shares in NLB, the significant debt-write off which

occurred as a result of the implementation of compulsory settlement is imputable to

Slovenia.

(55) The complainant also alleges that the method of loan recovery i.e. compulsory

settlement, did not comply with the approach which would have been used by a

market economy operator. The complainant then refers to the Commission Decision

in Frucona Košice44 to illustrate its point: compulsory settlement in Frucona Košice

was also approved by domestic courts and creditors; nevertheless, the Commission

concluded in its decision that the approved terms and conditions of compulsory

settlement constituted State aid. In addition, the complainant states that under section

172.4 of the Slovenian Insolvency Act, the domestic court which was tasked with

deciding whether Telekom Slovenije's objections against compulsory settlement

should be supported or not, was under an obligation to reject compulsory settlement if

the probability of creditors receiving favourable repayment terms (when compared to

bankruptcy) was lower than 50%. Therefore, in light of the above, the complainant

asserts that the Syndicate Banks' method of loan recovery constitutes State aid.

3. The loans to T-2's shareholders

(56) The complainant claims that the decisions of NLB, NKBM and Banka Celje to

provide a loan to T-2 shareholders constitutes State aid to T-2. It is alleged that the

decision was imputable to the State for the reasons developed in recitals (42) to (48) .

(57) The complainant also alleges that the loan to T-2 shareholders conferred an

advantage on T-2 because the banks' decision to grant the loan was contrary to the

MEOP as it was agreeing to finance T-2's losses which were already quite high.

(58) The complainant finally alleges that the decision of the above mentioned banks

favours T-2 and is therefore selective, and the measure distorts competition and

affects trade between Member States.

IV. POSITION OF THE SLOVENIAN AUTHORITIES, NLB AND NKBM

1. The loan agreement

(59) Slovenia, as well as NLB and NKBM, assert that the decisions of the Syndicate

Banks cannot be imputed to the State as Slovenia did not intervene in the decision

making process of the Syndicate Banks.

(60) Slovenia states that each of the Syndicate Banks independently used their internal

boards and committees to apply their lending and risk management policies to decide

whether they should grant the loan to T-2; therefore, the State was unable to influence

the decisions of the Syndicate Banks.

(61) As regards NLB, Slovenia points out that there was a shareholders agreement with

KBC and that at the critical time, Slovenia did not independently control NLB.

44

Commission Decision of 16 October 2013 in State aid SA.18211 (C25/2005) (ex NN 21/2005) OJ 2014 L

176, p.38. Note however that this Decision has been annulled by judgment of the General Court of 16

March 2016 in case T-103/14, Frucona Košice a.s. v Commission, EU:T:2016:152.

14

(62) Based on the Stardust Marine case law,45 Slovenia argues that in order to

demonstrate imputability it is insufficient to merely show that the State has control

over certain resources. Instead, it must be shown that there was an actual exertion of

control by the State. In this respect, Slovenia argues that in other Commission

decisions, a State measure was not considered to be imputable when the State had a

50% stake with the balance held by private investors46.

(63) Furthermore, the Syndicate Banks provided T-2 with a loan which was at market

conditions, which resulted in T-2 not receiving an advantage.

2. The compulsory settlement procedure

(64) The Slovenian authorities provided information demonstrating that the Syndicate

Banks discussed T-2's worsening financial situation in several meetings between 16

October 2009 and late 2012.

(65) As regards the process of securing the loan, the Slovenian authorities provided a

letter of T-2 in which T-2 stated that the securing of the loan was done in accordance

with the loan agreement; all equipment and networks that were complete and had

been handed over to T-2 were pledged as security. All assets owned by T-2 were thus

pledged as security, T-2 was not able to pledge assets it did not own (in accordance

with Slovenian legislation).

(66) The Slovenian authorities forwarded a letter of NLB where NLB describes in detail

the pledging process of the new network. NLB explained that T-2 kept the Syndicate

Banks informed about its progress in constructing new networks. The documentation

that must be submitted to the Notary Public in order to conclude the pledging

agreement of a new network includes inter alia: proof of ownership of network

components, a list of works carried out, proof of servitude rights regarding

construction and use of the network on the land over which the network runs, extracts

from the land register for all parcels over which the network runs, tenancy agreements

regarding structures in which equipment is located, a detailed list of the parts of the

network to be pledged together with the number of the land parcels in which they are

located, permissions to construct the network, and a copy or other documentary proof

of the entry of the optical network in the cadastre of the publication communications

network at the Surveying and Mapping Authority. NLB explained that on 14 January

2009 and 16 October 2009 respectively, the Siska optical network and the Murska

Sobota optical network47 were pledged. Additional activities relating to the pledging

of the optical networks under the loan took place at the end of 2009 and in 2010 but

the fact that on 17 September 2010, Telekom Slovenije filed a request to initiate

bankruptcy proceedings against T-2 prevented further procedures in accordance with

article 131 of the ZFPPIPP.

45

Judgment of the Court of 16 May 2002,C-482/99, France v Commission ("Stardust Marine")

ECLI:EU:C:2002:294. 46

Commission Decision of 10 July 2007 in State aid N791/2006 Business case Norrkopping, OJ C 227,

27.09.2007, p.4 47

Notarial Deed SV 69/09 and Notarial Deed 2244/09

15

(67) The Slovenian authorities also provided information on the policies of NLB and

NKBM to deal with a customer failing to settle its obligations when due. NLB's

Investment Approval Criteria and Procedures provide that in such a case, the relevant

organisational units monitor the client and are also responsible for carrying out pre-

judicial recovery using the following procedures: reminder procedure; settlement of

claims due by offsetting; activation of security instruments; withdrawal from the loan

agreement. NKBM has similar procedures which are set out in its "Policy document

on bad loans and recovery".

(68) The Slovenian authorities provided information from NLB stating that every

decision regarding the initiation of bankruptcy proceedings was a business decision.

NLB explained that it had no interest in immediately petitioning for the initiation of

bankruptcy proceedings against T-2 because it held the view that only a functioning

company is able to settle its obligations, while it was also of the opinion that its claim

was sufficiently secured. NLB explained that, on the basis of the information that in

the aFRP its loan was treated as only partially secured48, the Syndicate Banks together

with KPMG suggested that a new FRP should be compiled; however, this was not

accepted by T-2.

(69) NLB also explained that it did not register its claims in the compulsory settlement

procedure because it was of the opinion that the compulsory settlement would not

affect secured claims.

(70) As regards NKBM, the company explained that it regularly urged T-2 to fulfil its

obligations under the loan agreement and relied on all available procedures and other

measures aimed at the recovery of its claims due from T-2.49

(71) NKBM also explained that it did not file for a bankruptcy as it believed that a

compulsory settlement was more economically favourable than bankruptcy

proceedings. In this regard, NKBM also pointed at the valuation report of the

independent business valuer mentioned in recital (24). NKBM also explained that it

did not accept the compulsory settlement because it believed that it was a secured

creditor entitled to a separate settlement.

(72) Slovenia also provided information on the compulsory settlement procedure.

Slovenia contends that under Slovenian legislation, specifically Article 146 of

ZFPPIPP, compulsory settlement proceedings is an effective procedure for creditors

to receive more favourable repayment terms when compared to bankruptcy

proceedings as the former: (i) enables the insolvent debtor to progress financial

restructuring to achieve short term and long term solvency; and (ii) provides creditors

with more favourable payment conditions in respect of their claims when compared to

bankruptcy proceedings.

(73) Therefore the creditors voted for compulsory settlement proceedings instead of

bankruptcy proceedings in order to maximise their profits in relation to their claims.

48

EUR 55 million of the loan was secured whilst the remainder was not. 49

For example: (i) T-2's owners i.e. the partners of Gospodarstvo Rast d.o.o. and Zvon Ena Holding d.d.

were told to meet their financial commitments (as set out in Point 6.04 and Point 2.01 of the Contract on

Partner Contributions); (ii) T-2 were told to fulfil Point 9 of article 6.02 of the Credit Agreement, and (iii)

NLB as Agent of the loan sent monthly reminders to T-2

16

Slovenia pointed out that GRATEL – the main creditor with a claim of EUR 75.9

million and not State-owned – voted in favour of the compulsory settlement.

(74) An independent business evaluator concluded that the probability of receiving more

in a compulsory settlement procedure as compared to a full liquidation was more than

50%.

3. The loans to T-2's shareholders

(75) According to information provided by Slovenia, NLB, NKBM and Banka Celje

provided the following loan amounts to T-2's shareholders:

Bank Dates of loan T-2 Shareholder Amount

NLB

21 February 2006 –

13 February 2007 Zvon ena Holding EUR 247,952,394.14

16 May 2006 –

16 August 2007 Zvon dva Holding EUR 32,600,000.00

NKBM

2007 - 2009 Zvon ena Holding d.d. EUR 287,982,926

2008 - 2011 Zvon dva Holding EUR 87,318,037

2005 - 2012 Krekova Druzba za

storitve d.o.o. EUR 42,742,769

Banka

Celje 2006 - 2011 Zvon ena Holding d.d. EUR 3,108, 829.91

(76) Slovenia is of the view that the loans to T-2's shareholders were not granted for the

benefit of T-2. Until 2007, the loans to Zvon ena Holding were intended to finance

the company's financial investments. The terms of the loan did not specifically

indicate that it would include financing to T-2. Slovenia also asserts that some of the

loans NLB granted to Zvon ena Holding were in fact loan renewals and other loans to

Zvon ena Holding and Zvon dva Holding were for the repayment of previously

approved loans.

(77) Therefore Slovenia considers that the loan to the T-2 shareholders was not an

indirect loan to T-2.

(78) In particular, the table below illustrates that NLB's credit committees approved loans

to T-2's shareholders when it was required to do so each time the amounts fell within

the limits set by NLB's Supervisory Board. NLB's Supervisory Board approved the

granting of all loans to Zvon ena Holding d.d. and the Zvon Ena Holding Group on

the following dates and for the following time periods when the loan amount was up

to a certain percentage of the bank's capital:

Date of NLB’s

Supervisory

Board approval

T-2 Shareholder Time period

Loan amount

approved which

amounts to % of

NLB's capital

17 March 2006 Zvon Ena Holding d.d

Zvon Ena Holding Group

14 March 2006 –

13 March 2007 Up to 15%

14 September 2006 Zvon Ena Holding d.d 15 September 2006 –

14 September 2007 Up to 20%

14 September 2006 Zvon Ena Holding Group 15 September 2006 –

14 September 2007 Up to 25%

17

(79) Slovenia informs the Commission that the NKBM loans to Zvon ena Holding and

Zvon dva Holding were for the purchase of various securities and the financing to

Krekova druzba za storitve was to finance its basic operations.

(80) Banka Celje's Bank Loan Committee (BLC) together with its Management Board

approved loans to individuals. The Management board in accordance with Article 165

and in connection with Article 167 ZBan-1 asked its Supervisory Board to approve

the loans which it accordingly did.

V. ASSESSMENT OF EXISTENCE OF STATE AID

(81) By virtue of Article 107(1) TFEU, any aid granted by a Member State or through

State resources in any form whatsoever, which distorts or threatens to distort

competition by favouring certain undertakings or the production of certain goods,

shall, in so far as it affects trade between the Member States, be incompatible with the

internal market.

(82) The criteria laid down in Article 107(1) TFEU are cumulative. If any of those

criteria are not fulfilled, there is no need to examine the other criteria and the

presence of State aid can thus be excluded.

1. The T-2 loan

(83) The Commission will first assess the imputability criterion. According to the Union

Courts, even if the State is in a position to control a public undertaking and to

exercise a dominant influence over its operations, actual exercise of that control in a

particular case cannot be automatically presumed. A public undertaking may act with

more or less independence according to the degree of autonomy left by the State.

Therefore, in each case it is necessary to examine whether public authorities must be

regarded as having been involved in the adoption of the measures at issue50

. In

considering whether any of the measures were imputable to the State, the

Commission is to assess a number of indicators.51

(84) As a preliminary observation, the Commission notes that NLB and NKBM are joint

stock companies (see recital (13)). This means that they are not part of the State and

are in fact entities which are owned by shareholders, of which Slovenia is just one.

This indicates the lack of factors of an organic nature linking NLB and NKBM with

the State.

(85) The Commission also observes that Slovenian legislation provides safeguards

ensuring that the Supervisory Board of a bank acts in the interest of the company as

explained in recital (31).

50

Judgement of 25 June 2015 on State aid case T-305/13 Sace and Sace BT SpA v Commission,

ECLI:EU:T:2015:435 which confirms the jurisprudence in Case C-482/99 France v Commission

("Stardust Marine") ECLI:EU:C:2002:294. 51

Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty on the

Functioning of the European Union, OJ C 262, 19.7.2016, p. 1.

18

(86) In respect of NLB, the Commission observes that Slovenia held less than 50% of the

company's shares and that it exercised joint control over the company together with

the Belgian listed company KBC. As explained in recital (35) the shareholders

agreement explicitly provided that the company would be managed on an arm’s

length basis.

(87) As laid out in recitals (33) to (35), the shareholders agreement also implies that KBC

had representatives on both the Supervisory Board and the Management Board and

was able to participate in all business decisions. Thus, NLB appears to exercise its

activities on the market in normal conditions of competition, without taking into

account any direction from the State.

(88) The Commission also notes that the relevant boards and committees within NLB

approved the T-2 loan. The credit committee of NLB had a detailed credit analysis at

its disposal when taking its decision as explained in recital (37). The Supervisory

Board merely provided its consent. On this basis, the Commission observes that the

normal credit committee procedures were followed and has not been able to identify

any relevant State influence in the internal decision making process of NLB. Thus,

with respect to NLB, the Commission considers that it took the decision to grant the

loan without State intervention.

(89) In respect of NKBM, the Commission observes that at the time the loan was granted

to T-2: (i) NKBM had internal processes which adhered to Slovenian legislation in

respect of how the bank's various committees should be established; and (ii) there

were various guidelines, policies and procedures which were prescriptive as to how

each of the banks should approve loans. In line with the conclusion reached as

regards NLB, the Commission finds that the normal procedures were followed,

thereby lacking any substantive evidence of State influence in the internal decision

making process of NKBM.

(90) As regards the complainant's reference to government interference in the business of

the Syndicate Banks (see recital (42)), the Commission observes that those comments

are in essence general in nature and do not relate to interference in the T-2 loan (see

recitals (42) to (47)).

(91) As regards the relevance of the judgment in Elan52, the Commission observes that in

that case, Slovenia had full control of the decisions concerning Elan, which makes the

facts of the case manifestly different to this complaint. In addition, the complainant

contends that the Syndicate Banks should be defined as public undertakings under the

Transparency Directive. Even if the Syndicate Banks were defined as such, this

would not be evidence of imputability for the reasons outlined in recital (83) to (90).

52

In this judgment, the General Court upheld the Commission decision that a capital injection to Elan – a

limited company which produced ski equipment and marine oriented crafts, constituted State aid. The

measure was found to be imputable to the State as: (1) Slovenia held 74.95% of the share in Elan, in

addition KAD and DSU (both of which were Elan's shareholders) were 100% State owned and conducted

tasks for Elan which could be construed as acting on behalf of the State; (2) due to the ownership

structure of the Elan's shareholders and the control that Slovenia indirectly and directly had over them at

the time the measure was granted, Elan could be defined as a public undertaking within the meaning of

Article 2(b) of The Transparency Directive; and (3) due to the State's ownership of KAD, DSU and its

shareholding in Elan, the State as a natural consequence was able to appoint members of the Supervisory

which takes important decisions – is further evidence that the contested measure is imputable to the State.

19

(92) As regards the relevance of Bank of Greece, the Commission observes that the

present case can be clearly distinguished. In Bank of Greece, the bank in question was

State owned whereas in the present NLB and NKBM are not State owned to begin

with. Even if NLB and NKBM were State owned, this would still not automatically

be a determinative factor in respect of establishing imputability to the State. More

importantly, NLB and NKBM followed their credit procedures when granting the

loan while the contested measure in Bank of Greece concerns an interest rebate which

was directed by Greece.

(93) Finally, the fact that a number of the Syndicate Banks received State aid granted by

the Slovenian State does not automatically imply that all contractual counterparties of

those banks become indirect aid beneficiaries as the complainant suggests53. The

Commission notes that an indirect advantage is only present if the measure is

designed in such a way as to channel its secondary effects towards identifiable

undertakings or groups of undertakings, for example, if the direct aid is, de facto or de

jure, made conditional on the purchase of goods or services produced by certain

undertakings only (for example only undertakings established in certain areas). In this

context however, lending and decisions to restructure loans are part of the normal

business of a bank and can be dissociated from the recapitalisation of a bank.

Moreover, the Commission also notes that the State aid granted to a number of the

Syndicate Banks54 served a wide economic purpose55 (i.e. to avoid a serious

disturbance of the economy in the meaning of Article 107 TFEU) and was not meant

to help any individual borrower.

(94) In conclusion, based on the arguments set out in recitals (83) to (92), the

Commission cannot establish that the acts of NLB are imputable to the State. As the

complainant argues that the State intervened in NLB's subsidiaries via NLB, this also

implies that the imputability argument at the level of the subsidiaries should be

dismissed.

(95) In light of the above assessment, the Commission is unable to conclude that

Slovenia influenced the Syndicate Banks' decision process to approve the T-2 loan

and that therefore this measure would be imputable to the State. Therefore, the

imputability criterion in Article 107(1) TFEU has not been satisfied. As the criteria of

Article 107(1) TFEU are cumulative, there is no need to assess the other criteria and

the presence of State aid can therefore be excluded.

2. The compulsory settlement procedure

(96) As regards the question whether the Syndicate Banks provided aid to T-2 by not

properly securing the loan and by not recovering the loan in the period before the

compulsory settlement, the Commission observes that the Syndicate Banks took the

53

See recital (49)

54 The Commission notes that the same reasoning would apply to KBC, which in 2008-2009 also received

State aid from Belgium

55 See point 171 of the judgement of 15 September 1998 on State aid case BP Chemicals v Commission,

EU:T:1998:199

20

initiatives one could expect from a private creditor56. Where possible, and in

accordance with the loan agreement, it required the pledge of new networks57.

Therefore, the Commission concludes that the Syndicate Banks did not grant an

advantage to T-2.

(97) Moreover, the Commission concludes that the behaviour of the Syndicate Banks was

in essence driven by internal procedures58 and by the loan agreement and the Annex

VI thereof59, without there being any apparent influence from the State. In this

context, the Commission also recalls that NLB and NKBM are joint stock

companies60. Finally, the important presence of minority shareholders in NKBM –

which was also listed as of 10 December 2007 - and the shareholders agreement of

NLB are further indicators that the company's decisions in terms of securing and

recovering the loan are business decisions. Based on these arguments, the

Commission concludes that the behaviour of the Syndicate Banks following the

granting of the loan was not imputable to the State.

(98) As at least two elements of the State aid definition are not met (imputability and

selective advantage), the Commission concludes that the Syndicate Banks did not

grant State aid to T-2 through ineffective debt recovery of the loan and/or ineffective

pledging of the loan.

(99) As regards the compulsory settlement procedure itself, it appears to the Commission

that the decision to subject T-2 to compulsory settlement proceedings as opposed to

bankruptcy proceedings61 was market conform and therefore provided no advantage

to T-2 for the reasons explained below.

(100) As a preliminary point, the Commission notes that the complainant states

that the liquidation value of the collateral at the time of the compulsory settlement

would only amount to EUR 29,594,405 (see recital (52)), which implies that the

complainant seems to accept that the loan amount indeed substantially exceeded the

liquidation value of the collateral.

(101) First, as explained in footnote 24, creditors representing claims of EUR

104,543,402.16 (out of a total of EUR 138,537,237.95) - which is equivalent to

75.46% - voted in favour of the compulsory settlement. If the creditors formed the

view that bankruptcy would have offered better terms, they would have

overwhelmingly voted in favour of it. Two creditors voting against the compulsory

settlement (i.e. Telekom Slovenije and Mobitel with claims of respectively EUR 10.4

million and EUR 2.5 million) are competitors of T-2, which could at least in part be

an explanatory factor for their opposition to the compulsory settlement.

56

See footnote 49

57 See recital (66)

58 See recital (67)

59 See recital (20)

60 See recital (84)

61 When later creditors tried to put T-2 in bankruptcy, it turned out that this process was long and

cumbersome as explained in footnote 2828.

21

(102) Second, the Commission also takes note of the fact that an independent

business valuer had come to the conclusion that there was a probability of more than

50% that creditors would be better off under compulsory settlement procedures than

under liquidation62. In its report of 28 April 2011, the business valuer indeed

concluded that in the event of bankruptcy proceedings, unsecured creditors would

receive 27.87% of the repayment liabilities63, while this amount would increase to

29.44% in the event of compulsory settlement proceedings.

(103) Thirdly, the Commission takes note of the fact that the Syndicate Banks a

significant, albeit ultimately unsuccessful effort to obtain better treatment of their

claim, in line with what a private creditor would have done. NLB tried to convince T-

2 that the T-2 loan in its entirety should be subject to a separate settlement and wrote

together with KPMG an alternative FRP, which T-2 however did not accept. Banka

Celje tried (also unsuccessfully) to challenge the refusal to approve the aFRP in

Court, as explained in footnote 20.

(104) Concerning imputability, the Commission observes that the complaint draws

attention, in essence, to the fact that the Syndicate Banks did not register the

unsecured part of their loan in the compulsory settlement, which given the size of

their claim would have given them the power to determine the result of the vote. As

regards all the decisions of the Syndicate Banks which relate to the compulsory

settlement procedure, the Commission has not been able to find evidence which

shows that those decisions were imputable to the State. In fact, the available

documentation shows that the decision not to acknowledge that the loan was partially

unsecured and not to vote in the compulsory settlement procedure was taken in the

exercise of the commercial activities of NLB and NKBM and, thus, without State

direction. Moreover, when looking at the shareholders' structure of the Syndicate

Banks and in particular NLB, the Commission takes note of the fact that the

shareholders' agreement with KBC was still applicable and that KBC was still well

represented in the Supervisory Board of NLB. As regards NKBM, the Commission

takes note of the fact that the company was listed at the time and that the Slovenian

stake was just above 51%, as explained in recital (13).64

(105) The Commission is also of the view that other elements in the file do not

support the argument that there was a co-ordinated approach on behalf of the State to

grant an advantage to T-2. In this regard, the Commission takes note that the State-

controlled company Telekom Slovenije filed a petition for T-2's bankruptcy and made

numerous attempts to stop the compulsory settlement procedure as explained in

recitals (25) to (27). The Commission also observes that two State-owned entities (i.e.

Telekom Slovenije and Mobitel - with claims of respectively EUR 10.4 million and

EUR 2.5 million) voted against the compulsory settlement. Finally, as explained in

62

This analysis took into account the time value of money and the costs associated to bankruptcy

proceedings; the Commission also takes note of the additional support of key creditors (see footnote

2626) 63

Assuming that the assets would be gradually monetized over a period of 5 years. The figures broadly

coincided with the figures of 28.50% (bankruptcy) and 30.77% (compulsory settlement procedure) that T-

2 had forecast as part of its aFRP. 64

As regards decisions made by the subsidiaries of NLB, the reasoning developed in recital (94) also holds

for the compulsory settlement.

22

recital (28), the State-owned company Dutb decided in September 2014 to file for

bankruptcy, which is also inconsistent with the argument that the State was

attempting to provide aid to T-2.65

(106) Based on the arguments developed in recital (104) and (105), the

Commission concludes that the decisions of the Syndicated Banks related to the

compulsory settlement were not imputable to the Slovenian State.

(107) As explained in recital (99) to (103) , the Commission has not been able to

establish that the compulsory settlement procedure represented an advantage to T-2

which a normal private creditor in the situation of the Syndicate Banks would not

have granted. Moreover, in line with consistent case law of the Union Courts66, the

Commission cannot infer that a measure is imputable to the State from the mere fact

that a Member State holds shares, even majority shares, in an undertaking. Further

indicators must be present to lead to the conclusion that a measure is imputable to the

State. In the case at hand, the Commission concludes that there is no evidence to

show that the compulsory settlement procedure in respect of the Syndicate Banks was

imputable to the State.

(108) As the criteria of Article 107(1) TFEU are cumulative, and since as regards

the compulsory settlement procedure the imputability and the advantage criteria have

not been met, there is no need to assess the other criteria and the presence of State aid

can be excluded.

3. The loans to T-2's shareholders

(109) After reviewing the documents provided by Slovenia, the Commission

concludes that there was no requirement that the loans to the T-2 shareholders were to

be used to exclusively finance T-2. The Commission was also unable to establish that

those loans were to be used for that purpose, although Zvon ena Holding, Zvon dva

Holding, Finetol and I.J. Storitve and Krekova druzba za storitve d.o.o. were not

precluded from using that financial resource in that way if they wanted to.

(110) There is no evidence to substantiate the Complainant's allegation that T-2

was an indirect beneficiary of the loans, given that there is no evidence of direct or

indirect links between the loans granted to the T-2 shareholders and T-2 itself.

(111) Moreover, in terms of imputability, the analysis made in recitals (83) to (94)

also applies as regards the loans to T-2 shareholders. There are no sufficient

indications to conclude that Slovenia steered the decisions from the Supervisory and

Management Boards of NLB, NKBM and Banka Celje; also for those loans, the

companies concerned appear to have followed their normal credit procedures before

granting the loan. Moreover, the Commission notes that nothing suggests that the

actions of the shareholders of T-2 would be imputable to the State. Rather the

contrary. The Commission considers that T-2's shareholders did not follow

instructions by the State. On this basis, even if those shareholders had decided to

65 The Commission also takes note of the fact that T-2's compliance with the aFRP will be closely

monitored as described in footnote 25. 66

See footnote 50

23

finance T-2 on the basis of the loans obtained from NLB, NKBM and Banka Celje,

their actions would still not be imputable to the State.

(112) In light of the above, the Commission has found no evidence that the State is

imputable in respect of the loans to T-2’s shareholders. As the criteria within Article

107(1) are cumulative, there is no State aid within the meaning of Article 107(1)

TFEU.

VI. CONCLUSION

(113) On the basis of the above, the Commission has decided that the measures

complained of, namely:

(a) a loan to T-2 at preferential conditions by the Syndicate Banks;

(b) a lack of willingness by the Syndicate Banks to recover the debt from T-2

once difficulties of T-2 to repay its loan appeared and the write down of the

debt to 44% of its nominal value;

(c) a loan by certain banks among the Syndicate Banks to T-2's shareholders to

support T-2, hence resulting in T-2 becoming an indirect beneficiary;

do not constitute State aid within the meaning of Article 107(1) TFEU.

24

If this letter contains confidential information which should not be disclosed to third

parties, please inform the Commission within fifteen working days of the date of

receipt. If the Commission does not receive a reasoned request by that deadline, you

will be deemed to agree to the disclosure to third parties and to the publication of the

full text of the letter in the authentic language on the Internet site

http://ec.europa.eu/competition/elojade/isef/index.cfm

Your request should be sent by registered letter or fax to:

European Commission

Directorate-General for Competition

State Aid Greffe

B-1049 Brussels

Fax No: +32-2-296.12.42

Yours faithfully,

For the Commission

Margrethe VESTAGER

Member of the Commission