European Investment Fund

Transcription

1 European Investment Fund Thementag Verbriefung 11. Juni Wiesbaden 1

2 EIF - Overview European Investment Fund (EIF) is part of EIB Group and serves as: Europe's leading developer of risk financing for entrepreneurship and innovation Multilateral Development Bank (MDB) status Basel II 0% risk weighting Aaa/AAA/AAA ratings (Moody s/s&p/fitch) Shareholders : EIB 62%, EC 29%, Banks 9% 2

3 Optimising EC resources We manage programmes for the EC that deploy SME funding to promote entrepreneurship and innovation across Europe The Competitiveness & Innovation Programme (CIP SMEG) Available budget of over EUR 600m Committed budget of EUR 420m expected to mobilise EUR 7bn 53 transactions signed in 20 European countries The Risk-Sharing Instrument (RSI) Pilot project Supporting innovation Launched in Dec 2011, targeting innovative and research-oriented SMEs and small mid-caps Progress Microfinance EUR 200m provided by the EC and the EIB Supporting microenterprises and the social economy More than 50% committed at June

4 Guarantees & Securitisation 4

5 Investing in EIF Guaranteed Notes EIF is a synthetic investor EIF enjoys the Multilateral Development Bank (MDB) status Banks: Basel II (as implemented in EU via CRD): no capital charge to borrowings guaranteed by a Multilateral Development Bank Insurances: Solvency II: no capital charge to solvency positions guaranteed by a Multilateral Development Bank. - Efficient risk/return optimization - Diversified investment in SME 5

6 Helping Financial Institutions to lend more..by using our own capital to credit enhance tranches of SME loans or lease securitisation transactions placed on the capital markets Guaranteeing senior and/or mezzanine risk tranches Stimulating lending by letting Financial Institutions benefit from our credit quality and capital treatment Focusing on deals with SME portfolio exposures Committed EUR 2bn of credit enhancement transactions since the financial crisis in

7 Guarantee Instruments Development 2013 and beyond Product Portfolio Tranche Form Leverage SMEG First Loss Direct guarantee Counter - guarantee FLPG* First Loss + Second Loss Direct guarantee = 5 to 7 Risk Transfer Credit Enhancement Second Loss (mezzanine) Direct guarantee = 6 to 8 = 14 Risk tolerance Deal rationale Financial Institutions Pricing RSI Blended (uncapped) Direct guarantee Counter-guarantee = 5 (on EC FLPG) Leverage Self-sustainability ABS wrap Funding Senior Direct guarantee = 2 to 3 Target Beneficiaries *First loss product guarantee Expected Loss Expected Loss Expected Loss Expected Loss Expected Loss SMEG (First Loss) FLPG (First + 2 nd Loss) Credit Enhancement (Second Loss) RSI (uncapped) ABS wrap (Senior) 7

8 EIF Guarantees & Securitisation Deal facilitator for any SME-backed transaction - Credit enhancer of mezzanine and senior tranches, either with embedded or bilateral guarantee - Unconditional, irrevocable guarantee of timely payment of interest and ultimate repayment of principal, priced at market terms Own Funds Portfolio (as of 31/12/2012) - Outstanding commitment: EUR 2.6 bn - Number of outstanding transactions: 56 Transactions executed in 18 countries, including multicountry/multi-originator transactions 8

9 Transaction Process EIF always performs an independent, in-depth due diligence of each transaction: - Due diligence visits; - Review and input on the transaction structure; - Loan-by-loan analysis; - Review of legal and tax structure (typically through external counsel). EIF assigns an Internal Rating to each transaction according to a comprehensive Internal Rating Process: - Full asset and liabilities cash flow analysis; - Assignment of own internal rating (based on expected loss); - Dual internal modelling: analysis run in parallel by the front office and by the risk management department; - Ongoing monitoring including internal rating updates. 9

10 ABS Wrap Funding Issuer (SPV) Investor Originator Originator (s) Sell of lease receivables Senior tranche Purchase of Notes Guarantee Other transaction parties: Arranger Legal counsel Reporting agent Back-up servicer Rating Agency... FLP (retained) 20-30%* * Indication for Germany and depending on credit risk of the portfolio 10

11 ABS Wrap Funding Issuer (SPV) Investor Originator Sell of lease receivables Senior tranche Purchase of Notes Investor Guarantee Other transaction parties: Arranger Legal counsel Reporting agent Back-up servicer Rating Agency... FLP (retained) 20-30%* * Indication for Germany and depending on credit risk of the portfolio 11

12 EIB Group in ABSs Funding Size: EIB Group commitment can reach up to EUR 375m, no minimum outside placement required Requirements: true sale, static/replenishing, up to 5 years WAL, senior tranche must be rated AAA/AA+ by at least one agency Pricing: at market conditions, but EIB preferential rates and promotional requirements apply (retrocession + allocations) FLP (retained) + Cash Investor 12

13 Credit Enhancement Risk transfer Transaction Portfolio (earmarked) Originator Senior (retained) Mezzanine tranche Guarantee Other transaction parties: Arranger Legal counsel Reporting agent FLP (retained) 13

14 Transaction Selection Criteria Eligible countries All EU Member States, Candidate and potential candidate countries (Turkey, Croatia, Western Balkans, etc.) POOL CRITERIA Obligor Entities Credit Quality SME (EU definition), Middle-market companies eligible, but to a limited extent Credit quality supported by PD, LGD, or historical data Pool diversification Granularity > 300 names, Max. obligor exposure of typically 50bps, industry diversification Minimum tranche rating BB (exceptionally BB-) UNDERWRITING CRITERIA Max. amounts BB up to EUR 25m; BBB - AA up to EUR m; AAA up to EUR 150m (exceptionally EUR 200m for senior positions) Max. term Up to 10 years WAL (exceptionally up to 15 years) 14

15 Our Team George Passaris Head of Securitisation Unit Ioanna-Victoria KYRITSI Daniela FRANCOVICCHIO Alessandro TAPPI Head of Guarantees, Securitisation & Microfinance Division European Investment Fund 15 avenue J.F. Kennedy L-2968 Luxembourg Vincent van Steensel Head of Risk Sharing Instrument (RSI) Roland KAMPE Georgi STOEV

16 Appendix: EIF - Mandate Excurse: Risk Sharing Instrument 16

17 Excurse: Risk Sharing Instrument for Innovative and Research oriented SMEs and small Mid-Caps (RSI) - Overview EIF mandated to implement the RSI Facility Purpose - improve access to debt finance for innovative SMEs and Small Mid-Caps (Beneficiaries) EIF provides direct (and indirect) financial guarantees to selected Financial Intermediaries (FIs) Thanks to EIF Multilateral Development Bank status (MDB) and pursuant to Basel II, no capital charge on the covered part of the Portfolio Transfer of benefit Acceptable portfolio risk profile 17

18 SME 1 S. Mid-cap 1 SME n Excurse: RSI Direct - Guarantee structure Guarantee Rate: 50% of losses incurred in each loan Min 20% economic exposure to be retained by FI throughout the loan life Risk retained by the FIs Risk covered by EIF as guarantor Financial Intermediary Loan 1 Loan 2 Loan n Guarantee Guarantee Fee EIF as guarantor Beneficiaries 18

19 Sub-Intermediary Financial Intermediary Counter-guarantee from EIF Excurse: RSI Counter - Guarantee structure SUB-INTERMEDIARY Portfolio of eligible loans/ leases FINANCIAL INTERMEDIARY Portfolio of guarantees EIF Portfolio of counterguarantees Guarantee from the FI Guarantee Guarantee Fee Uncapped Counterguarantee Counter- Guarantee Fee EIF as Counterguarantor Credit risk retained by the Sub- Intermediar y Guarantee coverage provided by the Financial Intermediary Credit risk retained by the Financial Intermediary Counter-guarantee coverage provided by EIF Guarantee Rate as per the Financial Intermediary standard policy, but not higher than 80% 50% Counter-Guarantee Rate on a guarantee by guarantee basis 19