The government at an online sitting on Friday approved the terms of a working capital loan to listed shipper Tallink Grupp, which will allow the company to cover this year's operating costs.
The total amount of the loan limit is €100 million. The interest rate of the three-year maturity loan is 12-month Euribor plus 2 percent per year. The contract fee is 0.1 percent of the loan limit amount.
The loan can be issued in tranches, with each tranche a minimum sum of €10 million and a maximum sum of €40 million.
The loan interest is based on the average price of Tallink's existing loan commitments. The loan must be secured with the assets of the company's consolidation group and will be issued by the Kredex Foundation.
Minister of Economic Affairs Taavi Aas (Center) explained to ERR on Friday the government had based its decision on the fact that Tallink is an important company for Estonia and the company also proved that it has tried to get a loan from elsewhere but without success.
Aas explained this is not an investment for the government. "The government has not taken the position that we should remain a shareholder in Tallink, it is clearly an aid measure only."
Tallink CEO: We do not only want the state to support us
Tallink has previously said that it was seeking a loan of €150 million. In an interview with ETV's "Aktutual kaamera" on Friday, Tallink CEO Paavo Nõgene said a loan agreement of €100 million was decided during negotiations with the state.
"We have promised the state we do not only want the state to support us, so €100 million is the agreement we needed today," Nõgene said.
He did not confirm whether Tallink will now try and borrow an addition €50 from commercial banks but said it would be announced in the future if they did.
Nõgene said Tallink was forced to turn to the state because the situation is exceptional and banks do not want to take big risks at the moment.
Ain Hanschmidt, Chairman of the Management Board of Infortar, Tallink's largest shareholder, said Tallink did not ask the state for non-refundable support, but for a loan. He believes entrepreneurs will not emerge from the crisis on their own.
Tallink to focus on restoring freight, passenger carriage
Nõgene said the company can now focus on restoring freight and passenger carriage.
"For our part, we informed the state from the very beginning that, in parallel with applying for a quick liquidity loan from the state, we are also ensuring longer-term stability through financial institutions, and have therefore never assumed that our concerns will be solved by the Estonian state alone," Nõgene said.
"This liquidity loan will now allow us to focus on the restoration of freight and passenger transport services with our neighboring countries, which are very important to us, and on supporting the recovery of the Estonian tourism sector and the wider economy. We will announce the signing of the loan agreement and also the signing of other financing agreements through stock exchange announcements as soon as possible."
Tallink has seen its passenger ferry service halted as a result of the coronavirus pandemic and restrictions taken to mitigate the spread, including Finland closing its borders.
The company is now starting to sell tickets following an announcement by the Finnish government that Estonians with an employment contract in Finland would be able to enter or reenter the country.
Editor: Helen Wright