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FEI CREDIT LINESPME Investe I & II
FIN-EN -Sharing Methodologies on Financial Engineering for Enterprises
Lisbon Meeting, 26 September 2013
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Main factors which led to the launch of PME Investe I & II
Description of this Financial Engineering Instrument
Monitoring procedures
Results
CONTENTS
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2008 Economic Framework
Economic context in 2008 is, necessarily, related to the crisis in the international financial markets.
Some relevant facts:
Sub-prime crisis in the USA which rapidly spread to other economies
Euribor Rates rose to historical high levels
Increase in the cost and shortage of lending to households and companies
Increase in the price of raw materials as a result of the rising cost of
petroleum
Cooling down of the Economies
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Financing Costs in 2008
Historical Evolution of the 3 month Euribor RateEuribor Rates reached their
peak in October 2008,
reflecting liquidity problems
and lack of confidence in the
financial sector.
On average, during 2008,
Portuguese companies paid an
interest rate of 7.64% on loans
up to the amount of 1 M€,
higher than the rates in Euro
zone by approximately 170
basis points.
Interest Rate on new operations up to 1 M€
(*) Source: Statistical Bulletin of July 2013 – Bank of Portugal
0%
1%
2%
3%
4%
5%
6%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
EURIBOR 3M
0%1%2%3%4%5%6%7%8%9%
Jul-0
8Se
t-08
Nov-
08Ja
n-09
Mar
-09
Mai
-09
Jul-0
9Se
t-09
Nov-
09Ja
n-10
Mar
-10
Mai
-10
Jul-1
0Se
t-10
Nov-
10Ja
n-11
Mar
-11
Mai
-11
2008 2009 2010 2011
Interest Rate Portugal, loans up to 1 M€ (*)
Interest Rate Euro Zone, loans up to 1 M€
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Main factors which led to the launch of PME Investe I & II
Description of this Financial Engineering Instrument
Monitoring procedures
Results
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Launching Credit Lines PME Investe I & II
In a highly unstable macroeconomic environment, with strong constraints in accessing to credit, as
well as high associated costs of financing, two Credit Lines were launched, co-financed by Structural
Funds, to support Portuguese SMEs.
PME Investe II Credit Line
Amount of Credit : 1.000 M€
Generalist Sub Line: 750 M€
Trade Sub Line: 200 M€
Restaurants Sub Line 50 M€
Start: October/2008
Closing: May/2011
Amount of Credit: 750 M€
Start: July/2008
Closing: January/2009
PME Investe I Credit Line
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Setting up the Financial Engineering Instrument
The Portuguese Government invited Banks operating in Portugal to join this initiative, through the
signature of an Agreement also subscribed to by the Managing Authorities of COMPETE and
Regional Operational Programmes for Lisbon and Algarve, and the Mutual Guarantee Societies,
establishing the conditions for these Credit Lines:
Linha de Crédito PME Investe IEligible final recipients and eligible operations
Types of financing and loans conditions
Decision and contract process
Procedures of reporting and monitoring
Default and penalties
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Operationalisation
Banks are responsible for:
PME Investimentos, as the Credit Lines management entity, is responsible for:
Validating eligibility conditions
Assuring front office services during the settlement of credit and mutual guarantee agreements
Monitoring the investments made by companies
Providing information to PME Investimentos on the credit loans (contract, disbursement, interest rates,
early repayments) and defaults
Ensuring that the Credit Lines amounts set by the Managing Authorities are not exceeded.
Calculating the amount of public aid granted to companies and registering it in Central Register of de
minimis Aid
Representing the Managing Authorities when communicating with Banks and MGS
Promoting verifications in order to check eligibility conditions and the investments made by companies
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Funding Flow
The bank transfers the funds to the company and then the company repays the loan in accordance with the terms agreed
Payment of subsidised interest and guarantee fees
Contributions to Mutual Counter Guarantee Fund Capital
Banks
Mutual GuaranteeSystem
MCGF
PME Investimentos SME’s
FINOVA
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6
2
4Provide a guarantee for 50% of the financing
ManagingAuthorities
StateFunds
1Contribution of funds to FINOVA
3Counter guarantee of 80% of the guarantee
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Advantages for the SMEs
Competitive Interest Rates
Lower than the market average rates
Benefiting from a Mutual Guarantee
Easier access to credit as a result of sharing risk between Banks and MGS
Subsidised Interest Rates
Interest is partially subsidized
Guarantee Fees are fully subsidized
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Access Conditions
Micro, Small or Medium Enterprises
Location – company’s head office in Mainland Portugal
Company’s activity in line with SAFPRI (FEI national regulation)
No prior unjustified incidents or defaults with banks
All contributions to the Tax Administration or Social Security have been settled
Companies benefiting from PME Investe I Credit Line could not apply for Credit Line PME Investe
II
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Investments
Acquisition of land, real-estate, vehicles and second-hand goods
Financial restructuring and/or debt consolidation
Operations excluded by the SAFPRI (FEI national regulation)
Not eligible
Eligible
Investment in new tangible or intangible fixed assets and investment in working
capital related to the increase in activity
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Application Process
Banks
MGS
PME Investimentos
Credit RequestApplication
Approval
Maximum 3 business days
Approval of the guarantee
Maximum 7 business days SME’s
Settlement of credit and guarantee agreements
Maximum30 business days
2
1
54
3
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Funding conditions
(1) Minimum rate of 1.5%(2) Maximum Limits
Credit Line I
Maximum amount per company
PME Líder – 1,500,000 € Others – 1,000,000 €
Credit Line II Generalist
Credit Line II Restaurants
Credit Line II Trade
PME Líder – 1,000,000 € Others – 750,000 €
200,000€
PME Leader – 300,000 € Others – 250,000 €
Interest rate to be paid by the company
Euribor 3M – 1.25% (1)
Euribor 3M – 0.50%(1)
Maturity (2)
PME Líder
5 years
Others
4 years
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Months
Disbursement Period
(2)
6 Months 50%
Grace Period
(2)
Guarantee(2)
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Process to determine company ratings
Company Rating
The risk level of the company takes into consideration the Equity ratio and the Net Debt/EBITDA ratio and
classifies the company accordingly with the lowest rating observed for each of them.
PME Líder rating has its own methodology and is a label issued by IAPMEI, under proposal of Banks, recognizing
the quality of companies performance, growth and risk profile.
Example
Company from the Industrial Sector
Equity Ratio 35% - Rating A
Net Debt/ EBITDA: 4 years – Rating B
Thus, the company is rated as having
a B risk level.
others Trade and Services
Other companies:
Rating A ≤ 3 ≥ 30% ≥ 20%Rating B 3 a 5 20 a 30% 15 a 20%Rating C ≥ 5 ≤ 20% ≤ 15%
PME Líder Specific methodology
Net Debt / EBIDTA (number of years )
Equity Ratio
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Interest Rates
Spreads and Guarantee Fees
Gap between interest rates
The Credit Lines rates are quite
attractive compared to the market,
reflecting the impact of the
subsidies granted and the effect of
negotiating with Banks, which
includes providing a mutual
guarantee.
Companies pay the 3 month
Euribor rate, deducted by 1.25%
and 0.5%, respectively, for Credit
Lines I and II, with a floor, which at
the end of January 2009, was
reduced from 3% to 1.5%.
(*) Source: Statistical Bulletin July 2013 - Bank of Portugal
0,00%
1,50%
3,00%
4,50%
6,00%
7,50%
9,00%
Jul-0
8
Set-0
8
Nov-
08
Jan-
09
Mar
-09
Mai
-09
Jul-0
9
Set-0
9
Nov-
09
Jan-
10
Mar
-10
Mai
-10
Jul-1
0
Set-1
0
Nov-
10
Jan-
11
Mar
-11
Mai
-11
2008 2009 2010 2011
Interest Rate Portugal, loans up to 1 M€ (*)
Credit Line I and II, interest rate paid by the company
PME Líder 1,250% 0,625%
Rating A 1,375% 0,750%Rating B 1,500% 1,125%Rating C 1,875% 1,750%
Guarantee feesRisk LevelOverall Spread
(50% SGM)
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Main factors which led to the launch of PME Investe I & II
Description of this Financial Engineering Instrument
Monitoring procedures
Results
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Regular Procedures
Validation of contract information
Validation of disbursements
Validation of interest grants
Validation of guarantee fees
Monitoring Procedures
Procedures for the reporting of information by Banks and MGS were established, allowing
PME Investimentos, as managing entity of the Credit Lines, to undertake a number of
control procedures during the life of the credit loans.
Additional Procedures
Validate eligibility of final recipientsand investments made
Monitoring defaults
Monitoring counter guarantees issued
Monitoring called on guarantees
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Main factors which led to the launch of PME Investe I & II
Description of this Financial Engineering Instrument
Monitoring procedures
Results
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Demand Profile
53% Small companies
Credit Lines PME Investe I & II
1.535 M€Total Credit Loans
4.508Loans
Average operation amount 340 k€
42% Northern Region
44% Industrial Sector
Average maturity 4.4 years
62% Investment in Fixed Assets
Average number of employees 36
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Multiplier Effect
Investment
1.750M€Credit Loans
1.535M€
Public Investment138 M€
Counter guarantees
MCGF
612 M€
GuaranteesMGS
766 M€
Companies 4.443
Employment 160.000
Multiplier Effect
11 X
Leverage information is based on updated costs estimate.
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Total Credit Transaction
Since 2009, the Portuguese
Government has launched
new subsidised and
guaranteed Credit Lines,
under the management of
PME Investimentos,
exclusively financed through
national funds. By the end
of June 2013, these Credit
Lines reached 62,000
companies, responsible for
approximately 850,000 jobs.
Evolution of the Credit Lines
2008
PME Investe IPME Investe II
2009
PME Investe IIIPME Investe IV
2010
PME Investe VPME Investe VIQREN InvestePME Investe - Aditamento
2012
PME Crescimento
2013
PME Crescimento 2013
20081.267 M€
20094.821 M€
20107.690 M€
20118.221 M€
20129.777 M€
June 201310.583 M€
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Contacts
Carlos de CastroVice-President and CEO
Telephone numbers:(+351) 21 799 42 74(+351) 21 799 42 75
Contacts