L 10434 Official Journal of the European Union 24.4.2009 COMMISSION COMMISSION DECISION of 4 June 2008 on State aid C 9/08 (ex NN 8/08, CP 244/07) implemented by Germany for Sachsen LB (notified under document number C(2008) 2269) (Only the German text is authentic) (Text with EEA relevance) (2009/341/EC) THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Community, and in particular the first subparagraph of Article 88(2) thereof, Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof, Having called on interested parties to submit their comments pursuant to the provisions cited above (') and having regard to their comments, Whereas: 1. PROCEDURE The case originated as an ex officio request for infor- mation sent to Germany on 21 August 2007. By letter of 21 January 2008 Germany notified the measures as ‘no aid’ for reasons of legal certainty and indicated as a precaution that the measures should in any event qualify as rescue and restructuring aid compatible with the common market. By letter dated 27 February 2008, the Commission informed Germany that it had decided to initiate the procedure provided for in Article 88(2) of the EC Treaty in respect of the measures. The Commission decision to initiate the formal investi- gation procedure (hereinafter called ‘the opening decision’) was published in the Official Journal of the European Union (3). The Commission invited interested parties to submit their comments on the aid. Germany submitted its own comments after the opening of the formal investigation procedure on 28 March and 10, 16, 23 and 30 April 2008. One observation from a third party was received on 16 April 2008. Germany (") O] C 71, 18.3.2008, p. 14. (?) See footnote 1. () submitted its comments on this third-party observation by letter of 30 April 2008. A number of meetings and regular telephone conferences took place with Germany, the beneficiary and Land- esbank Baden-Wiirttemberg (hereinafter called LBBW). 2. INTRODUCTION The present case originated with the still ongoing US subprime crisis in which Landesbank Sachsen Giro- zentrale (hereinafter called Sachsen LB) and in particular one of its off-balance conduits, Ormond Quay, was caught. A conduit — also known as a special purpose vehicle (SPV) or special investment vehicle (SIV) — is a corporate body (usually a limited company of some type or, sometimes, a limited partnership) created to fulfil narrow, specific or temporary objectives, primarily to isolate financial risk (usually bankruptcy but sometimes a specific taxation or regulatory risk). SIVs have been used because they can remain off balance sheet and not be consolidated by banks. This allows banks to fund lending at cheaper rates than those they would provide themselves (due notably to the obligations of regulatory liquidity ratios). The conduit refinances investments in asset-backed securities (ABSs) by borrowing in the short-term asset-backed commercial paper () (CP) market. Potential liquidity needs of the conduits (where the commercial papers are not sold completely) are bridged by credit lines provided by commercial banks. Ormond Quay was used by Sachsen LB to fund investments in ABSs which included US mortgage- backed securities. In order to guarantee the liquidity needs of the conduit in case the commercial banks withdrew the credit lines, Sachsen LB had to guarantee the liquidity of Ormond Quay and assume special liquidity facilities. In return for assuming the risk, Sachsen LB received the generated surplus of the (®) Commercial paper is a money market security issued by large banks and corporations.