Member Article

In partnership with the five main Portuguese banks¹, the State has created the Company Recovery Fund which targets the recovery of small and medium companies (SMCs)². The name of the fund in Portuguese is FUNDO RECUPERAÇÃO, FCR.

In a joint communication dated 21 July 2009, the Ministries of Finance and the Economy classified this Company Recovery Fund as an investment fund for "debt refinancing" or "turnaround", and made it clear that the fund would have a duration of 15 years and an initial capital of 395 million euros, with a 15.2 % contribution from the State and with the possibility of being increased to 750 million euros, thus allowing the expansion of this instrument by increasing the shares of the member credit institutions or by bringing in new credit institutions or other public or private entities.

This is a risk capital fund and its objective is to support the restructuring of "companies with economic potential, but with financial structures that are improperly adjusted", so as to bring "dynamism to the Portuguese business fabric, maintaining levels of activity and, at the same time, making company consolidation possible and bringing solutions of succession and professionalization of management".

Restructuring of companies will be achieved by converting their debts to the State or to the banks into shares or debt instruments, and this may also include capital injections. The investment period is set at between three and five years, and provision is made for the possibility of acting in all sectors of activity, except the financial sector.

The Fund is already regulated by the Portuguese securities market commission (Comissão do Mercado de Valores Mobiliários (CMVM)), and its activity began on 31 July 2009, with the company ECS CAPITAL – S.A., which focuses its activity on investment management, taking on the role of its managing entity.

The access of SMCs to this Fund requires them, at the first stage, to enter into contact directly with one of the five participating financial institutions whose responsibility it is, in turn, to present the "candidacy" to the fund managing entity. This entity then analyses and selects the company restructuring operations according to purely business criteria but always on the basis that the companies involved have their tax and social security situation in order or that this situation will be regularised immediately as part of the restructuring process that is beginning.