When the court-supervised restructuring proceedings commenced in December 2004, Tapiola demanded payment of the outstanding debts of Karjaportti from the City of Mikkeli under the guarantee. After having made such payments to Tapiola, the City of Mikkeli stepped in as a creditor of Karjaportti in place of Tapiola (see recital 34).

Other measures were granted to Karjaportti for the construction of the production facility in Tikkala. Finnvera granted loans and guarantees of FIM 20 000 000 (approximately EUR 3 363 759) and the Ministry of Employment and the Economy (then: Ministry of Trade and Industry) awarded direct grants amounting to FIM 15 000 000 (approximately EUR 2 552 819).

The gross grant equivalent of the guarantee granted by the City of Mikkeli was calculated by Finland in the following way: it compared the market rate for a comparable guarantee (1,75 %) to the guarantee premium actually charged by the City of Mikkeli (0 %). The aid element in the guarantee equals the difference between the two premiums, that is 1,75 %. If the City of Mikkeli had charged a premium at that rate, it would have collected FIM 2 406 250 FIM as premiums during the validity of the guarantee of 10 years, which discounted at a rate of 5,7 % on the date the guarantee was granted would make FIM 1 055 949 FIM (approximately EUR 345 786).

The aid element of EUR 3 617 143 corresponds to an aid intensity of 13,95 % of the total eligible costs of EUR 25 935 928.

By decision of 8 March 2004, the City Council of Mikkeli granted a guarantee covering 100 % of a loan of EUR 607 054 to be granted by Tapiola. On 14 April 2004, the loan was granted at a fixed interest rate of 4 % with a duration of 10 years. The guarantee was granted without guarantee fee and as an absolute guarantee. The loan and the guarantee respectively were given to replace a loan granted by Tapiola for which the City of Mikkeli had originally granted a guarantee by a decision of 2 November 1992. The original loan amounted to FIM 7,5 million (EUR 1 261 409) and was granted at an interest rate of 4,5 % for a duration of 10 years.

The guarantee was collateralised by way of the property mortgages on the production site of Tikkala that were already used as collateral for measure 1. In addition, the City of Mikkeli held a business mortgage with a value registered in the business mortgage register of FIM 25 million. Also this business mortgage was already used as collateral for measure 1.

When the court-supervised restructuring proceedings commenced in December 2004, Tapiola demanded payment of the outstanding debts towards Karjaportti from the City of Mikkeli under the guarantee. After having made such payments, the City of Mikkeli stepped in as a creditor of Karjaportti in place of Tapiola (see recital 34).

When the court-supervised restructuring proceedings commenced in December 2004, Tapiola demanded payment of the outstanding debts towards Karjaportti from the City of Mikkeli under the guarantee. After having made such payments, the City of Mikkeli stepped in as a creditor of Karjaportti in place of Tapiola (see recital 34).

Subsequently, a restructuring programme was submitted to the District Court on 23 June 2005 and a revised restructuring programme on 30 November 2005. The duration of the restructuring programme, which was approved by the District Court on 30 January 2006, was ten years (until 1 July 2015). Between 2004 and 2008 Karjaportti has terminated 372 employment contracts and outsourced some of its activities such as acquisitions, butchery and cutting activities.

On 16 December 2004 in relation to these court-supervised restructuring proceedings Tapiola demanded the City of Mikkeli to pay the outstanding amounts of the three loans guaranteed by the City of Mikkeli described under 3.1.1, 3.1.3 and 3.1.4. After having paid Tapiola, the City of Mikkeli became creditor of Karjaportti as regards the overall amount of the three outstanding loans, which was EUR 5 356 895. The loans were secured by the collateral described in recitals 15, 27 and 29.

In addition, the City of Mikkeli entered a claim amounting to EUR 682 087 in the court-supervised restructuring proceedings, consisting of unpaid charges to the City property administration, the water management department of Mikkeli and the waste management department of Mikkeli. This claim was also secured by the collateral described in recitals15, 27 and 29.

In relation to the loans and to other debts (unpaid charges) towards the City of Mikkeli, the following measures were foreseen in the restructuring programme:

On 2 September 2005 Karjaportti sold 50 % of the shares in the real estate company Kiinteistö Oy Suksimäki to a company owned by the City of Mikkeli, for a purchase price of EUR 860 000.

The conversion of unpaid interest rates into loans in the year 2005 was in principle laid down in the restructuring programme. According to the programme, not only the City of Mikkeli, but all secured creditors in this context were to be treated similarly. Accordingly, on 28 December 2005, [one private creditor] converted interest rates into a loan amounting to approximately EUR 1 623 000 with a loan period until the end of 2010. The interest rate was EURIBOR 3 months plus 1,5 %. The repayment was supposed to start in 2009. On 29 December 2005, [another private creditor] converted interest rates into a loan amounting to approx. EUR 1 532 500 with a loan period until the end of 2010. The interest rate was 3 months EURIBOR plus 2 %. The repayment was supposed to start in 2009.

By a decision of 5 February 2007, the Mikkeli City Board agreed on the write-off from the 2006 accounts of a receivable from Karjaportti amounting to EUR 274 023. The writing-off of the debt in the accounts had no effect on the legal relationship between the creditor and the debtor, and consequently, the City of Mikkeli continued to pursue the collection of the debts.

The City of Mikkeli made a write-off for an uncertain receivable from Karjaportti amounting to EUR 5,7 million in its financial statements of 2008. The writing-off of the debt in the accounts had no effect on the legal relationship between the creditor and the debtor, and consequently, the City of Mikkeli continued to pursue the collection of the debts.

The decision of the City Council of Mikkeli did not become final, as a complaint was made at the administrative court of Kuopio (Kuopion Hallinto-Oikeus). Following this complaint, the court ordered the City of Mikkeli to halt the implementation of the guarantee and to seek approval of the aid by the Commission.

As the decision of the City Council of Mikkeli to provide the guarantee did not become final, Tapiola refrained from granting the loan to Karjaportti. Lastly, Finland withdrew the notification of the guarantee in March 2010, as Karjaportti withdrew its application for the guarantee and the City Board decided on 22 February 2010 not to implement the decision of the City Council.

Deferral of the repayment of secured debts: According to the restructuring programme approved by the court, Karjaportti was supposed to reimburse EUR […] in 2009 and EUR […] in 2010 of the outstanding amount of the secured debts (see Table VI). According to the notification, the reimbursement of these amounts should have been postponed, the latest until 1 July 2015.

On 17 March 2004, Finnvera granted a 100 % guarantee for a loan amounting to EUR 91 000 with a guarantee fee of 3 % per year. The loan, which had a duration of 3 years, was granted by Tapiola at a fixed interest rate of [2-5] % per year. The loan and the guarantee respectively were given to replace a loan granted by Tapiola in 1992.

On 12 January 2006, Finnvera granted a loan amounting to EUR 180 000 at an interest rate of EURIBOR 6 months + 2 % per year. The loan relates to interest accrued during the restructuring process between 2 December 2004 and 28 February 2008, which was converted into a new credit facility. The loan was collateralised by mortgages in properties located in Tikkala, Lappeenranta and Kouvola, and shares in […]. The duration of the loan was until the end of 2010 and repayment should have started in 2009. On 23 November 2011, EUR […] of the capital was still outstanding. Private creditors […] and […] converted the interest rates at the same time into loans.

On 28 December 2005, [a private creditor] converted interest rates into a loan amounting to approximately EUR 1 623 000 with a loan period until the end of 2010. The interest rate is EURIBOR 3 months plus 1,5 %. The repayment was supposed to start in 2009.

On 29 December 2005, [another private creditor] converted interest rates into a loan amounting to approx. EUR 1 532 500 with a loan period until the end of 2010. The interest rate was 3 months EURIBOR plus 2 %. The repayment was supposed to start in 2009.

On 14 September 2006, Finnvera granted a counter-guarantee to […] amounting to EUR 300 000 with a guarantee fee of 1,65 % per year paid by Karjaportti. […] in turn granted a guarantee to Karjaportti for the same amount at an interest rate of 1,25 %. This guarantee and the counter-guarantee covered 16,7 % of EUR 1,8 million relating to a subcontracting agreement between […] and Karjaportti. The duration of Finnvera's guarantee was 8 months. The remainder of the subcontracting agreement was covered by guarantees from […] and […] (EUR 825 000 and EUR 675 000 respectively) who charged a guarantee fee of 1,75 %. Finnvera was not involved in the grant of these guarantees, that is to say they were not counter-guaranteed. Finnvera's counter-guarantee expired on 30 June 2007 without having been invoked. Accordingly, no payment obligations were incurred by Finnvera on the basis of this guarantee.

On 6 July 2007, Finnvera granted a loan amounting to EUR 250 000 at an interest rate of EURIBOR 6 months + 2,5 % per year. The loan had a duration of six months and should have been reimbursed by 15 January 2008. So far, only part of the loan was reimbursed (outstanding amount on 23 November 2011: […]).

At the same time, private creditors, […] and […], granted loans amounting to EUR 800 000 and EUR 650 000 respectively, also for a duration of six months. The interest rate for those loans was 1 month EURIBOR plus 2 %. The reimbursement of their loans has also been delayed (outstanding amounts on 23 November 2011: EUR […] and EUR […]).

For those two loans and the loan granted by Finnvera, Karjaportti provided the following collateral: a business mortgage with a registered value of EUR 1 850 067; shares in the company […]; and a bank account. These collaterals were divided between Finnvera, […] and […] according to their risk in relation to the loans. In fact, the three creditors had the same ranking and divided the collateral by way of a share of percentages (Finnvera: [0-30] %; [the first private creditor]: [10-50] %; [the second private creditor]: [10-50] %).

On 9 January 2008, Finnvera granted a counter-guarantee to […] amounting to EUR 280 000 with a guarantee fee of 2,5 % per year paid by Karjaportti. The counter-guarantee covered 80 % of a guarantee provided by […] to Karjaportti on 11 January 2008 amounting to EUR 350 000 relating to a subcontracting agreement between […] and […]. […]charged a guarantee fee of [0-3] %. Finnvera had access to a collateral in the form of a shareholding of Karjaportti in […]. According to an estimate undertaken by Finnvera, dated 8 January 2008, at the time of the grant of the counter-guarantee these shares had a security value for Finnvera of EUR […]. The counter-guarantee expired on 28 February 2011, and no payments were made under it.

In the second opening decision, the Commission expressed doubts that the terms and conditions of the purchase complied with the market economy investor principle, as Finland did not provide evidence that the purchase of the properties was done under market conditions, such as an evaluation of the properties by an independent expert.

In the second opening decision, the Commission doubted that the measure in question would be in conformity with the private market economy investor principle. First, in accordance with the Guarantee Notice 2000 that was in force at the time of the granting, the measure may constitute state aid since the guarantee covered 100 % of the loan in question. This conclusion would not be changed by the Guarantee Notice 2008 currently in force. Moreover, granting the guarantee without a commission fee, that is in effect taking on a financial risk without any quid-pro-quo, cannot be described as the behaviour of a market operator, in particular in a situation where the company already was in difficulties.

As regards the compatibility of the measure, the Commission was not provided sufficient information that would allow it to determine whether the requirements set out in the R&R Guidelines 1999 were met.

The Commission had similar doubts as for the guarantee granted on 8 March 2004.

In the first opening decision, the Commission doubted that the measures taken during restructuring would be in conformity with the private market economy investor principle.

First, the City of Mikkeli agreed to reducing the interest rates for the secured debts with the effect that the interest rates charged were far below the reference rate for Finland at that time. Since the reference rate is considered to be the market rate for healthy companies, and since Karjaportti was in difficulties at the time, the Commission found it unlikely that a private creditor would have granted the loans at such a low interest rate.

In the second opening decision, the Commission doubted that the measure in question was in conformity with the private market economy investor principle, as Finland did not provide the evidence that the purchase of the shares was done under market conditions.

As regards the conversion of the unpaid interest rates into a loan, the City of Mikkeli agreed to charge a very low interest rate for the loan. In fact, private creditors converting their unpaid interest rates negotiated higher interest rates, which led the Commission to question whether such an approach could have been in line with the market economy investor principle.

In the second opening decision, the Commission considered that if the write-off of debts in the financial statements in 2006 and 2008 also included the legal obligation ceasing to exist, the write-off would confer an advantage to Karjaportti. In the Commission's view it was questionable whether a private market investor would have acted in the same way.

In the first opening decision, the Commission doubted that the City of Mikkeli would act like a private market investor when granting the guarantee and considered preliminarily that the guarantee entailed state aid. As regards compatibility, the Commission had doubts whether the guarantee would comply with the R&R Guidelines 2004, as the "one time, last time principle" seemed not to have been met. In addition, the guarantee fee and the interest rate for the loan were too low in order to satisfy point 25(a) of the Guidelines and the guarantee was not in line with point 25(c) of the Guidelines, as it was not limited to six months.

In the first opening decision, the Commission doubted that the City of Mikkeli acted like a private market creditor when agreeing to the rescheduling of debts and considered preliminarily that the measure entailed state aid. As regards compatibility, the Commission had doubts whether the debt rescheduling would comply with the R&R Guidelines 2004, as the "one time, last time principle" seemed not to have been met. In addition, the debt rescheduling did not meet the requirements for rescue aid. It was not limited to six months and was hence not in line with point 25(c) of the Guidelines.

Finland argues that the guarantee should not be considered state aid, as Karjaportti would probably have been able to acquire such a guarantee from private capital markets. Finland refers to the fact that Tapiola granted the loan that was secured by the guarantee in question as part of a financing package of EUR 25 million for the investments in the Tikkala production site. Other parties contributed to the financing. State support for the investment consisted of the assignment of land and bearing the costs for the levelling of the site by the City of Mikkeli (see recitals 89 and 90), loans and guarantees granted by Finnvera as well as direct grants granted by the Ministry of Trade and Industry.

In addition, Finland claims that the City of Mikkeli was treating all companies applying for guarantees on an equal basis.

Finland claims that the current book value of the plot is not a comparable indicator for the determination of the value of the plot at the time of the transfer. The City of Mikkeli estimates the market value of the land at the time of the assignment at EUR 300 000. According to Finland the costs of levelling the site amounted to FIM 2 million (EUR 336 376).

Finland considers that the transfer of the plot of land and bearing the costs for levelling of the site has been in line with the RAG 1998 (see recital 87).

According to Finland, the purchase of the properties in the year 2002 related to the construction project of the Tikkala production facility for which Karjaportti needed funding. Finland claims that the properties were bought at a market price. The evaluation took into account that the properties were purchased in order to turn them into predominantly residential use through an alteration of plans, while part of the area was still in business use. In addition, the properties were subject to mortgages given to private creditors and alone one of the six properties had a total mortgage of approximately EUR 9,6 million, which confirms that the value of the properties was higher than the purchase price. Hence, the City of Mikkeli respected the market economy investor principle and the purchase did not include state aid.

Finland states that the guaranteed loan was granted to offset an old pension loan that was granted in 1992. At that time, the City of Mikkeli, together with Finnvera and […], guaranteed for the pension loan. As a counter-security, the City of Mikkeli received a mortgage with the value of FIM 7,5 million (EUR 1 261 409) on a property of Karjaportti. When issuing the guarantee on 8 March 2004, the City of Mikkeli retained this security.

Finland argues that the original guarantee was granted before Finland's accession to the EU. When the City of Mikkeli granted the new guarantee on 8 March 2004, no new aid was granted, as the existing original guarantee was converted into a new guarantee while retaining sufficient counter-securities. In addition, at the same time, also other guarantors of the original pension loan of 1992 granted loans to Karjaportti.

Finally, Finland disputes that Karjaportti was in difficulty within the meaning of the R&R Guidelines 1999 in spring 2004. According to Finland, the market projections were satisfactory in the first half of 2004 and Karjaportti had budgeted a profit of EUR 3 million for 2004. In addition, Karjaportti was able to get loans from private lenders at relatively low interest rates during spring and summer 2004. Finally, in December 2004, Karjaportti was considered a viable undertaking when its creditors approved the restructuring despite its prolonged financial difficulties. Otherwise, Karjaportti would have been declared bankrupt.

Finland considers the guarantee as a continuum of funding provided for the investment in the Tikkala production facility in the year 2000 by the City of Mikkeli. The guarantee was granted to complete the original investment plan initiated in 2000. At the time the guarantee was granted, Karjaportti was not in difficulty within the meaning of the R&R Guidelines 1999, as already brought forward for the guarantee granted in March 2004 (see recital 93).

According to Finland, if the guarantee involved state aid, it was compatible as it was in line with the RAG 1998. Large companies were eligible for regional aid measures under Article 107(3)(a) of the TFEU if they did not exceed the amount of 24 % of the eligible net costs. These conditions were met, as the aid element of the guarantee was only EUR 57 835 whereas the overall investments of Karjaportti in Tikkala amounted to EUR […].

Second, no new loans were granted during the proceedings, but payment of debts granted prior to the restructuring was rescheduled in conformity with the national legislation on restructuring of enterprises, treating the creditors on an equal basis. In addition to the City of Mikkeli's receivables, receivables of private players were also rearranged during the proceedings. The creditors of Karjaportti were divided into several groups. The receivables of each group of creditors were subject to mutually equal and similar terms. Finland points out that this is in particular true as regards the secured debts of the City of Mikkeli. Hence, it seems that the City of Mikkeli has acted like a private market economy investor when agreeing to the court-supervised restructuring proceedings.

In addition, Finland points out that the City of Mikkeli had deemed it more profitable to reschedule the debts than to allow Karjaportti to go bankrupt and to close down permanently, which is also showed in a liquidation balance sheet attached to the restructuring programme.

As regards the compatibility of the measures under the R&R Guidelines 1999, Finland argues that a company subject to restructuring proceedings should generally be deemed as firm in difficulty within the meaning of the Guidelines. It then repeats that the restructuring proceeding did not involve state aid and that the City of Mikkeli did not carry out support measures during the restructuring proceedings.

Then Finland brings forward arguments relating to each of the measures granted: As regards the triggering of City of Mikkeli's guarantee for the loan granted in 2000, Finland argues that Mikkeli did not grant any new loans to Karjaportti, but simply stepped in as a creditor on the demand of Tapiola at the beginning of the court-supervised restructuring proceedings, which was an ordinary measure under such restructuring proceedings. As regards the terms and conditions of the repayment of the loan, Finland points out that they had been specified in the restructuring programme and were equal for all creditors within the same group of creditors.

As regards the unpaid charges, Finland clarifies that the receivables are owed to the City property administration, the water management department and the waste management department of the City. The receivables consist of unpaid charges that had arisen prior to the commencement of the court-supervised restructuring proceeding. No guarantee was granted for those outstanding amounts by the City of Mikkeli, as they were receivables due to the City. Hence, when the court-supervised restructuring proceedings started, they were entered into the restructuring programme as one sum.

Finland claims that the shares of the real estate company Kiinteistö Oy Suksimäki were purchased at a market price from Karjaportti. Finland submitted an independent valuer’s statement according to which the value of the shares amounted to approximately EUR 1 million based on the prevailing rent level. This value was adjusted as regards the actual prevailing rent level and the shares were accordingly bought at a price of EUR 860 000. Hence, the property transaction did not include any aid element.

Concerning the conversion of the unpaid interest into a loan, Finland firstly argues that the non-payment of interest rates is a typical measure to court-supervised restructuring proceedings. The conversion of such unpaid interest into loans, which will be better ranked than other loans, is foreseen by Finnish legislation. In addition, Finland considers that the conversion of the unpaid interest into a loan was taken in accordance with the private market investor principle, as private creditors converted unpaid interest receivables into loans together with the City of Mikkeli.

Finland confirms that recording the debts as a loss is simply a bookkeeping operation on the creditor's part, done in accordance with the principle of prudence and the respective provisions in the Accounting Act 1336/1997. Finland argues that the debt write-off does not affect the legal relationship between the creditor and the debtor, i.e. the debts were not waived. The City of Mikkeli has confirmed that it has not waived the debts recorded as losses and that it continues to pursue collection. The debt is part of the secured debt under the court-supervised restructuring proceedings.

Before the notification of the guarantee was withdrawn in March 2010, Finland argued that the guarantee was compatible according to the R&R Guidelines 2004. In light of the withdrawal of the notification, Finland's arguments are not presented in more detail.

Finland argues that rescheduling of debts is a measure inherent to court-supervised restructuring proceedings and does not involve state aid. According to Finland, the creditors of Karjaportti had a mutual understanding that the rescheduling of debts was a reasonable alternative in order to safeguard their receivables. It informs the Commission that the notified rescheduling was never implemented, as the administrative court of Kuopio (Kuopion Hallinto-Oikeus) halted the implementation of the debt rescheduling. Finland explains that Karjaportti's debts were nevertheless rescheduled, following several proposals by Karjaportti in the period 2009–2011, which were accepted by the City of Mikkeli. Finland claims that this subsequent rescheduling was in line with the market economy investor principle, as the City of Mikkeli and all other creditors implemented the rescheduling at equal terms.

Finland considers that the guarantee was granted in line with the Guarantee Notice 2000. In any event, the guarantee did not involve state aid. First, Finnvera's risk was not increased, as the guarantee replaced a guarantee that Finnvera granted earlier (in 1992) for a pension loan. This loan was replaced by a new pension loan in 2004, for which Finnvera granted the guarantee in question. In addition, two private creditors granted credit facilities to Karjaportti at the same time in order to allow for funding the postponement of the 2004 payments. Furthermore, the guarantee was subject to a high fee and the aid element of the guarantee was below the de-minimis threshold. Finally, the forecasts for Karjaportti were good at the time the guarantee was granted.

Finland considers that the loan granted in 2006 did not involve state aid as Finnvera acted like a private market creditor when converting the unpaid interest into a new loan in line with the restructuring programme. In addition, private creditors converted their unpaid interest into new loans shortly before Finnvera did so and at similar conditions.

Finland considers that the guarantee was granted in line with the Guarantee Notice 2000. In any event, the guarantee does not involve state aid as it only covers 16,7 % of EUR 1,8 million and private creditors were covering the remainder of this amount by way of guarantees.

Finland considers that the loan granted in 2007 did not involve state aid as Finnvera acted together with two private creditors who granted new loans at the same time and at similar conditions. In addition, the loan was collateralised by way of valuable mortgages and business mortgages.

Finland considers that the counter-guarantee was granted in accordance with the Guarantee Notice 2000. In any event, it does not involve state aid as the other party involved was a private lender and the guarantee fee imposed by Finnvera was considerably higher than the guarantee fee imposed by the private lender.

As the decision of the City Council of Mikkeli to provide a guarantee to Karjaportti did not become final and the City Board decided in February 2010 not to implement the guarantee, Finland withdrew the notification of the guarantee in March 2010. Thus, as regards the guarantee, the investigation became without object.

Accordingly, the Commission has to assess whether the purchase of land can be considered a normal commercial transaction. To this end, it has to be considered whether the price paid by the City of Mikkeli reflected the value of the properties and the building bought.

According to the interested party, a private market investor would not have been willing to pay EUR 6,7 million for the factory buildings which the City of Mikkeli bought at this price.

Finland informed the Commission that no evaluation of the land exists. The Commission considers that the value of the mortgage held by a private bank might give an indication of the value of the property. Indeed, before accepting collaterals, a bank will value the property in question so that if the debtor is not able to pay back its debt, the bank may be satisfied by realising the mortgage.

For the properties in question, the City of Mikkeli paid a purchase price of EUR 6 646 787, which is below the registered amount of the mortgage held by a private party on one of the properties prior to closing the sale procedure. In addition to this property, five other properties and a building were sold to the City of Mikkeli. In addition, the Commission notes that the City of Mikkeli bought the properties with a view to converting the land into residential area by implementing changes to local plans; the properties were located near city centre and in an attractive residential area.

On the basis of the foregoing, the doubts raised by the Commission in the opening decision concerning the price paid for the properties and the buildings are dispelled. It is considered that the City of Mikkeli bought the properties and the building at a price that reflected their value and that the market investor test is met. The Commission therefore concludes that the measure does not involve state aid.

As for the guarantee granted in June 2000, several steps have to be distinguished (granting of the guarantee; payment under the guarantee; change of conditions in the loan; compare recital 132). Accordingly, in the following, it is examined whether the guarantees given in March 2004 and in May 2004 constitute state aid. The question whether the changes in the conditions of the loan could entail state aid is assessed as part of measure 6 (see recitalsto 188-195).

Finland's main argument, as described in recitals 96-98, is that the City of Mikkeli was not more generous than other creditors of the company, but that the City of Mikkeli acted together with private creditors of the beneficiary and at the same conditions. Accordingly, it acted like a private market economy investor when agreeing to the restructuring programme.

In the case at hand, the Commission has to determine whether the guarantees granted in March and May 2004 (measure 4 and measure 5) can be severed from the court-supervised restructuring proceedings (measure 6). Whereas it is true that all three measures have been decided within one year, the Commission observes that they intervened in a different context. In the meantime, a court-supervised restructuring proceeding had been initiated, in which all creditors of the company participated. The purpose of measure 6 therefore was no longer to enable the company to return to viability without insolvency by obtaining fresh money from private banks. Rather, the City of Mikkeli, as all other creditors, aimed, in their role as creditors, to maximize the recovery of their outstanding claims under the constraints of the national bankruptcy law. Therefore, the Commission considers that measure 6 can be severed from measures 4 and 5.

.As described in recital 31, Karjaportti, together with its private creditors, filed for court-supervised restructuring proceedings with the District Court of Mikkeli according to the Restructuring of Enterprises Act 47/1993. A restructuring programme was submitted to the Court, including details of the measures currently under assessment. The Court, after having checked the details, approved the restructuring programme. The Commission notes that Karjaportti has been subject to court-supervised restructuring proceedings under Finnish law. In fact, the purpose of such a court-supervised restructuring proceeding is to rehabilitate a distressed debtor's viable business, to ensure its continued viability and to achieve debt arrangements. Therefore, the Commission considers that the measures taken by the City of Mikkeli during the court-supervised restructuring proceeding can be assessed according to the market economy investor principle.

First, it is noted that overall, the […] of restructuring debts (approximately [30-70] %) is owed to private creditors. The main private creditors are Nordea Bank, Pohjola Bank and Nordea Financing. Second, it has to be considered that the creditors of Karjaportti were divided into different groups, according to their ranking. Together with the private creditors Nordea Bank, OKO/Pohjola Bank and Nordea Financing as well as the state owned specialised financing company Finnvera, the City of Mikkeli belonged to the group of creditors of large secured debts. As can be seen in Table IV, within these large secured debts, the City of Mikkeli has a share of [10-40]%, whereas the private creditors together have a share of [30-70] %. Finnvera has a share of [10-40] %.

In the following, each of the measures taken by the City of Mikkeli is assessed in more detail:

Reduction of interest rates for secured debts: As can be seen in Table V, the interest rates for the loans and other debts (unpaid charges) which were considered "large secured debts" were the same for private and public creditors, with the exception of […]. This creditor received an interest rate of […] EURIBOR for all outstanding amounts from the commencement of the restructuring proceedings, whereas the other creditors received for a part of the outstanding amounts only […] EURIBOR minus […]% until 2010. This difference was due to the fact that […] had the highest ranking as regards the collaterals provided by Karjaportti as security. It is considered that […] higher ranking justifies the difference in the interest rates applied.

Rescheduling of loans: The claims of the City of Mikkeli were deferred to the same extent as the claims of other secured debtors. As can be seen in Table VI, Karjaportti has to pay instalments to all secured creditors from July 2009 on until 2015, when the biggest part of instalments becomes due (43 % of the capital of each of the secured debts). The instalments to be paid to each creditor all have the same proportion in relation to the overall amount of the claim of the respective creditor (2 % of the outstanding amount for the first three instalments; 4 % for the next two instalments; 6 % for the remaining instalment). The last instalment amounts to 43 % of the capital for each of the secured creditors. Accordingly, the City of Mikkeli has not been treated less favourable than the private creditors in a similar situation.

Conditional debt waiver: According to the restructuring programme, as described in recitals 42 and 43, the amounts to be waived at the end of the court-supervised restructuring proceedings, if certain economic requirements are not met, are based on a comparison between the value of the collateral if Karjaportti continues its operations, and the value of the collateral in case of its realisation, determined for each of the respective creditors, taking into account their respective rankings. The value of the collateral in the two scenarios was determined by two independent valuators at the time when the restructuring programme was set up, based on comparable prices and rental information. Against this background, […] does not have to waive debts at the end of the court-supervised restructuring proceedings, as it is the highest ranking creditor. The amounts for the other creditors were also determined according to the said methodology, resulting in the amounts presented in recital 43. The methodology used in determining the respective amounts can be considered credible, in particular as it relates the respective ranking to the value of the respective collateral in the two scenarios. In practice, the calculation was based on independent expert evaluations, and the same principles were used to all creditors when determining the amounts by which the restructuring debts can be at maximum reduced at the end of the court-supervised restructuring proceedings. In light of this, it can be considered that all creditors were treated on an equal basis.

Overall, the Commission considers that the City of Mikkeli was not treated less favourably than the private creditors during the court-supervised restructuring proceedings. Where differences to the other creditors occur, they were justified by the different quality of collaterals the respective creditors held. Therefore, in light of the above, it has to be concluded that the beneficiary did not gain an advantage within the meaning of Article 107(1) of the TFEU from the court-supervised restructuring proceedings. The doubts that the Commission raised in the opening decision are dispelled and the measures described in recitals 31-43 do not constitute state aid.

First, the Commission notes that the purchase of shares was not part of the court-supervised restructuring proceedings.

Finland claims that the City of Mikkeli acted in line with the market economy investor principle when purchasing the shares. First, following the logic of the BP Chemicals case (see recitals 189-191), it has to be determined whether the market economy investor principle can be applied to measure 7, as the City of Mikkeli had already granted aid measures to Karjaportti in the past. In this context, the Commission notes that measures 4 and 5 were taken before the beginning of the court-supervised restructuring proceedings, whereas the purchase of shares only took place afterwards. In addition, whereas the purpose of measures 4 and 5 was to allow the beneficiary to continue to have access to liquidity, after the beginning of the court-supervised restructuring proceedings it was clear that those needs would be addressed within such proceedings. Therefore, it is considered that measure 7 can be severed from measures 4 and 5 and that the market economy investor principle is in principle applicable to measure 7.

At the time the shares were sold, the property was rented out below the market rent level. According to the valuation, the market rent level could be reached in two years, with the maximum yearly rent increase. Accordingly, the value of the property was adjusted at the time of the purchase and in the end, the City of Mikkeli bought the shares at a price of EUR 860 000.

The valuation was undertaken by an independent expert. The methodology used, as described above, was to first check the capital value at market rent, then the resale value. Both values were based on market data and the two values were used to determine the value of the shares, which was also adjusted to the rent level prevailing at the time of the purchase. This methodology is considered as plausible. The Commission concludes that the shares in Kiinteistö Oy Suksimäki were bought at a market price and that the measure did not confer an advantage to Karjaportti.

On the basis of the foregoing, the doubts raised by the Commission in the opening decision have been dispelled and it is concluded that the measure does not include state aid.

First, it has to be verified whether these debt write-offs could confer an advantage to Karjaportti. This would be the case if the City of Mikkeli abandoned to pursue the collection of the debts, that is if it waived the debts in question.

As described at recital 105, Finland confirmed that the write-off of debts was only an accounting measure that does not affect the legal relationship between the creditor and the debtor, that is to say that the debts were not waived. According to the documents submitted by Finland, the City of Mikkeli is still pursuing collection of the debts.

According to the principle of prudence under the good accounting practice and in accordance with Accounting Act 1336/1997, the value of receivables entered in the balance sheet may not exceed their probable value. Accordingly, receivables that probably cannot be collected are recorded in the profit and loss statement as an expense.

On the basis of the foregoing, the Commission considers that the debt write-off was only done in the financial accounts of the City of Mikkeli in line with accounting standards and the respective claims are still pursued within the court-supervised restructuring proceedings.

The doubts raised by the Commission in the opening decision have been dispelled and it can be concluded that the measures did not provide an advantage to Karjaportti. Therefore, measure 9 and 10 do not involve state aid.

Finland argues that the measure was foreseen in the restructuring programme for the court-supervised restructuring proceedings and that Finnvera took the measure together with private creditors.

It is true that the measure was already foreseen in the restructuring programme for both private and public creditors of Karjaportti. According to the documents submitted by Finland, the conversion of interest actually took place in the end of 2005 and the beginning of 2006. Also private creditors converted their interest rates into loans.

First, following the logic of the BP Chemicals case (see recitals 189-191), it has to be determined whether the market economy investor principle can be applied to measure 14. In this context, the Commission notes that measures 4, 5 and 13 were taken before the beginning of the court-supervised restructuring proceedings, whereas measure 14 was taken in the course of such proceedings. For the reasons set out above in recitals 189–191, the Commission considers that measure 14 can be severed from measures 4, 5, and 13. In addition, measure 14 was even foreseen in the restructuring programme itself, which had the purpose of bringing the company back on track.

Second, as regards the application of the market economy investor principle to the measure at hand, the Commission considers that the loans granted by the private creditors […] and by […] are comparable to the loan granted by Finnvera. As secured creditors in the court supervised restructuring proceedings the companies are all in a similar situation. Given that these loans were granted at similar conditions to the loan granted by Finnvera (same loan period, comparable reimbursement period) and that the interest rate that Finnvera asked was even more favourable for Finnvera (EURIBOR 6 months + 2 % was 4,643 % on 1 January 2006) than the interest rate the private creditors received (on 1 January 2006, EURIBOR 3 months + 1,5 % was 3,988 %; EURIBOR 3 months + 2 % was 4,488 %), the Commission concludes that the measure did not confer an advantage to Karjaportti.

On the basis of the foregoing, it is concluded that the measure does not include state aid.

First, the Commission considers that the beneficiary of the measure is Karjaportti, although the counter-guarantee was granted to […]. The low fee charged by […] from Karjaportti indicates that […] only granted the guarantee in the light of the guarantee granted by Finnvera. Indeed, in fact, Karjaportti and not […] pays the guarantee premium for the counter-guarantee to Finnvera.

In any event, Finland considers that Finnvera acted on the same terms as private creditors […] and […] did. It is true that […] and […] were in a similar situation as Finnvera. All three companies are secured creditors in the court-supervised restructuring proceedings. They all have granted loans and guarantees to Karjaportti before ([…]).

By the same token as for measure 14, following the logic of the BP Chemicals case (see recitals 189–191) it is considered that the market economy investor principle can be applied to measure 15, as this measure is severable from measures 4, 5 and 13 (see recital 253).

Concerning the measure in question, overall the guaranteed loan amounted to EUR 1,8 million. Finnvera counter-guaranteed […] for only 16,7 % of this sum (EUR 300 000). The remainder of the loan was covered by guarantees from […] and […] (EUR 825 000 and EUR 675 000 respectively), which were not counter-guaranteed by Finnvera. From the perspective of the beneficiary Karjaportti, the overall costs for the counter-guaranteed guarantee were higher than for the guarantees granted by […] and […]. Whereas the latter two charged a guarantee fee of 1,75 % from Karjaportti, the total financing costs for the counter-guarantee for Karjaportti were 2,9 % (1,65 % for the […] guarantee plus 1,25 % for the counter-guarantee). It follows that the measure taken by Finnvera did not confer an advantage to Karjaportti.

On the basis of the foregoing, it is concluded that the measure does not include state aid.

As described at recital 110, Finland argues that the loan did not involve state aid as it was part of a larger funding measure in which also private creditors took part.

By the same token as for measure 14, following the logic of the BP Chemicals case (see recitals 189–191) it is considered that the market economy investor principle can be applied to measure 16 (see recital 253).

As outlined in recital 254, the Commission considers that […] and […] are in a comparable situation to Finnvera. Concerning the specific measure under consideration, it is true that Finnvera granted the loan at the same time at similar conditions as […] and […]. The duration of the loans was for all creditors six months; for all loans, payment was delayed in the same proportion (outstanding amount for all creditors is approximately […]% of the original amount). All three loans were secured with the same collateral, as described in recital 66, and the collateral is divided among the creditors according to the risk of the respective creditor in relation to the loan it granted. Concerning the interest rate, it seems that the interest rate that Finnvera asked was even more favourable for Finnvera (EURIBOR 6 months + 2,5 % was 6,847 % on 6 July 2007) than the interest rate the private creditors received (on 9 July 2007, EURIBOR 1 month + 2 % was 6,105 %). Accordingly, the loan can be considered to be in line with the market economy investor principle and not to entail state aid.

On the basis of the foregoing, it is concluded that the measure does not include state aid.

As regards measure 4, the securisation of Karjaportti's loans could be considered as normal for the purpose of the Reference Rate Communication 2008. Karjaportti provided a property mortgage and a business mortgage for measure 4. The registered values of these two instruments are quite high (see recital 27). It has, however, to be taken into account that the very same collateral was already used to collateralise other claims of the City of Mikkeli (such as measure 1), so that not the full amount would be available for the measure at stake. Also, it has to be considered that the actual value of the property mortgage as well as of the business mortgage depends on the value of the encumbered goods and the City of Mikkeli's ranking.

In this context, it is noted that Finland could not provide an evaluation of the value of the collaterals at the time of granting the guarantee. It provided, however, two independent valuations of the collateral in general, used for drawing up the restructuring programme, dated 15 February 2005 (see recital 43), which is quite close to the date of granting the guarantee. In this context, it is mentioned that in light of the rank of the City of Mikkeli the property mortgage might suffice to cover its claims if the property is kept in use; if Karjaportti has to be liquidated, the value of the property might be too low to cover any of the City of Mikkeli's claims. The business mortgage might cover only part of the City of Mikkeli's claims. In light of this, it seems plausible to consider the collateral provided as normal quality collateral.

Therefore, the interest rate Karjaportti should have paid for a loan under market conditions, without a guarantee, is the reference interest rate of 4,43 % plus a risk premium of 650 basis points, which reflects the risk premium applicable to a firm in difficulty providing normal collateral. The aid amount should therefore be calculated as the difference between this theoretical market rate and the interest rate at which the guaranteed loan was actually provided (4 %), after the deduction of the price actually paid for the guarantee, that is to say 0 basis points. The difference between these rates shall be calculated for the period the rate actually provided was applied.

The aid shall bear recovery interests calculated from the moment the difference between the theoretical interests and the interest rate at which the guaranteed loan was actually provided would have been due until effective recovery.

As regards measure 5, the securisation could be considered as normal for the purpose of the Reference Rate Communication 2008. Karjaportti provided the same collateral as for measure 4, that is to say a property mortgage on the production site of Tikkala and a business mortgage. In addition, a "special pledge" on the production site of Tikkala was granted, with a registered value of EUR 1 135 268 (see recital 29). To all these collaterals the same reasoning applies as provided above for measure 4, and it seems plausible to consider the collateral provided as normal collateral.

The interest rate Karjaportti should have paid for a loan under market conditions, without the guarantee, is again the reference interest rate of 4,43 % plus a risk premium of 650 basis points. The aid amount should therefore be calculated as the difference between this theoretical market rate and the interest rate at which the guaranteed loan was actually provided (12 months EURIBOR + 0,3 %), after the deduction of the price actually paid for the guarantee, i.e. 0 basis points. The difference between these rates shall be calculated for the period the rate actually provided was applied.

The aid shall bear recovery interests calculated from the moment the difference between the theoretical interests and the interest rate at which the guaranteed loan was actually provided would have been due until effective recovery.

The Commission is not aware of details of the securisation of measure 13, and it can thus only provide the method how the recovery has to be effected. In a first step, if measure 13 was indeed collateralised, the value of such collateral according to the Reference Rate Communication has to be determined.

The interest rate that Karjaportti should have paid for a loan under market conditions, without the guarantee, is again the reference interest rate of 4,43 % plus a risk premium reflecting the value of the securisation. The aid element should be calculated as the difference between this theoretical market rate and the interest rate at which the guaranteed loan was actually provided ([2-5] %), after the deduction of the price actually paid for the guarantee, which was 3 %. The difference between these rates shall be calculated for the period the rate actually provided was applied.

The aid shall bear recovery interests calculated from the moment the difference between the theoretical interests and the interest rate at which the guaranteed loan was actually provided would have been due until effective recovery.

As regards measure 17, the securisation could be considered as normal for the purpose of the Reference Rate Communication 2008. Karjaportti provided collateral in the form of a shareholding in a company, which Finnvera estimated to have a security value of EUR […], as described in more detail in recital (67). The interest rate Karjaportti should have paid for a loan under market conditions, without the guarantee, is again the reference interest rate of 5,19 % plus a risk premium of 650 basis points. The aid amount should therefore be calculated as the difference between this theoretical market rate and the interest rate at which the guaranteed loan was actually provided ([0-3] % plus the interest rate for outstanding amounts under the subcontracting agreement) after the deduction of the price actually paid for the guarantee, that is to say 250 basis points. The difference between these rates shall be calculated for the period the rate actually provided was applied.

The aid shall bear recovery interests calculated from the moment the difference between the theoretical interests and the interest rate at which the guaranteed loan was actually provided would have been due until effective recovery.