EFSI 2.0: Investment Platforms as a silver bullet? CDP experience as National Promotional Institution for Italy Bruxelles, June 6 th 2017 - Antonella Baldino, Chief Business Officer
The new architecture introduced by Juncker Plan Adapting to a new paradigm of governance and coordination Opportunity to improve coordination between NPBIs and the EIB Group Necessity to strengthen relations among NPBIs across different European countries Need to foster coordination, at national level, between the NPBI, the public stakeholder and private investors/financial institutions EFSI capped portfolio «EFSI-like» vertical min 20% CDP risk (no State Aid) scope Investment Platforms launched in 2016 partners SMEs risk sharing (case study) Pan-EU ENSI platform for SMEs loans securitization ITAtech for technology transfer within pan-eu equity platform Large Infrastructure and Corporate platforms Marguerite I&II and CEBF CDP commitments & investments ~5 ~10 NPBIs NPBIs Total resources (1) 2 (1) EFSI metrics
Estimated new investments SMEs New Loans Rationale More access to finance for IT SMEs Risk Sharing umbrella under SMEW ~6 bln 80% (counter) capped at EL level 20% FIs risk retained FIs Sub- Intermediaries Max 80% Guarantees Additionality Crowding-in of Private Sector Blending of EU Funds Leverage effect 28x Max 80% (counter) Investment Platform - Risk Sharing CDP-EIF in SMEW 50% Counter- 20% Risk retained 30% Counter- Guaranteed portfolio up to 3,125 bln EIF/EFSI SMEW (COSME) CDP own risk CDP/EFSI-like 112,5 45 67,5 EU, CDP s and national funds for 225 mln 3
Rationale and context Fondo di Garanzia (FdG) is the main national instrument to support access to finance to Italian SMEs: in 2016, more than 114.000 transactions d by the FdG (total d portfolio of 11.6 bn/ and total new financing of 16.7 bn/ ) Guarantees issued by the FdG are counter-d by the IT State: capital relief for the Fis Leverage effect and estimated impact ( mln, #) 112.5 x 2 COSME and IT resources 3.125 ~ 10% x ~ 80% cap rate x max (counter) rate 0.70% ~ 4.500 3.125 Guaranteed Portfolio ~ 6.000 E No learning curve for the FIs as it is a well- known and established instrument Boosting the FdG means, from the SMEs perspective, more access to finance at better prices Guaranteed Portfolio 4.500 New financing Average rate 67k Average size of portfolio inclusions* New financing New investments ~ 67,000 Estimated # of SMEs (final beneficiaries) *based on average size of similar transactions d by Fondo di Garanzia 4
Annexes 5
What the Investment Plan for Europe represents for NPBIs: CDP s experience Public Entities/ Postal Saving Infrastructure Privatisation Enterprises, export & internationalization, equity instruments Mission extended to enterprises Nov. 14 Investment Plan for Europe and new role as NPI New Business Plan and National Promotional Institution by national law 2015 ex Com. CE Budget 22.07.2015 Law 16 Working together to sustain Jobs and Growth The Role of NPIs under IPE 1850 2003 2009 Cooperation with Shareholder of on-lending programs co-financing s s ABS equity NPIs enhanced pan-eu cooperation under IPE Enhanced cooperation between NPB s on the one hand and the Commission and the EIB Group on the other is a key condition for the success of the Plan 6
Guarantee structure Main features Focus CDP d portion Loss cap rate FdG retained risk ~ 10% - 100% Area Beneficiaries Max portfolio volume CDP rate EIF counter (Cosme) Government counter Content FdG Other FIs 3.125 billion (of which 3 billion for FdG) 80% with loss cap at ~ 10% 50% free of charge 30% granted upon consideration CDP intervention CDP counter-s 80% of a new portfolio of max 3 billion with a loss cap rate CDP, as NPI, actives a "Juncker Platform" through which it gains access to COSME and domestic funds in the form of counter-s CDP prices its counter-s at market conditions Loans included in this first transaction are those eligible under the COSME Program Thanks to CDP s intervention, the FdG achieves a capital relief effect which creates room the issuance of new s in favor of Italian SMEs up to ~ 10% 80% portfolio with a ~ 10% loss cap rate Total funds for 1st loss 225 million (of which 216 for FdG) The combined use of EU/domestic financial resources translates into a very efficient mechanism for the FdG 7
Facts/assumptions to estimate the capital amount that can be freed up by the FdG Funds provided by the EIF and employed by CDP in the scheme: 108 mln Corresponding first-loss piece size: 216 mln Guarantee rate at 80% with loss cap at ~ 10% and maximum d portfolio of 3,000 mln All-in cost, split between credit risk remuneration and structuring/managing fees: 4.5% Earn out mechanism to reimburse fees in excess paid by FdG if portfolio over-performs vis-a-vis the cap rate Impact on FdG New lending from freed up capital ( /mln) Total cost for FdG amounts to 108 million 4.5% Guarantee cost 2.4 bn Guaranteed amount 108 Total cost MEF share 64.8 43.2 CDP share 108 8 864 70% 1,234 The transaction allows the FdG to free up 108 million (216 108) which can be re-invested in the issuance of new s for up to 864 million (x8 leverage) 8
Main advantages for the various stakeholders More access to finance Easier access to finance Transfer of benefit High leverage effect Quick deployment Additionality Final Beneficiaries EIF/EFSI/EU (Sub)-Intermediaries For NPIs/MSs Enhancement of standard/existing products Risk Sharing and capital relief Standard origination and servicing model Special treatment of contributions to IPs Blending of EU funds with national funds High impact on economy/economies of scale 9