The council of the KredEx Foundation discussed Porto Franco's application for a loan of €39.4 million at the beginning of July. They decided to send the application to the government which will be discussed at a cabinet meeting this week or the next one.
Government approval is required for all public loans in excess of €10 million.
Ando Leppiman, chairman of the Supervisory Board of KredEx, said if the government decides to grant the loan and its terms, the Supervisory Board will return to this application and decide to make a decision on concluding the loan agreement.
He added: "We have also asked the government for a preliminary assessment of whether to process this loan application. They found that it is an important project on a national level and they should assess it. The loan is for financing construction works. It is clearly a working capital loan and we have to deal with the effects of the crisis. We have identified the conditions of the loan to the government of the republic through various risks. The decision is in the government's hands now."
Rauno Teder, CEO of Porto Franco, said no construction work is currently taking place on-site. The company has planned to resume back as soon as the loan is received from the state and will be repaid within three years. Teder added that this would be so-called bridge financing.
Teder said: "Initially, the loan will be invested in construction work. In times of crisis, banks have told us that more money needs to be invested at first, later it will be repaid to KredEx. It is a cooperation between both sides."
Porto Franco signed a €102 million loan agreement with the European Bank of Reconstruction and Development (EBRD) and Luminor Bank a few weeks before the government imposed the emergency situation in the state due to the spread of COVID-19.
The EBRD's share in the loan is €63 million and Luminor's share is €39 million.
Porto Franco announced in early July the EBRD had made additional demands to mitigate the risks of the economic downfall.
The EBRD wants Porto Franco's shareholders to contribute more money than previously agreed in the early stages of construction work. In addition to that, they want to set up a guarantee account with €10 million to service bank payments in 2022.
The Porto Franco development has an area of over 150,000 square meters in the business district by the Port of Tallinn. The total cost of the development was estimated at €190 million at the end of February.
Editor: Katriin Eikin Sein