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European Investment Fund
1
Thementag Verbriefung
11. Juni 2013 - Wiesbaden
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%
EIF - Overview
2
Optimising EC resources
3
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 micro-
enterprises and the
social economy
More than 50% committed
at June 2012
4
Guarantees & Securitisation
Investing in EIF Guaranteed Notes
5
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
“
”
EIF is a synthetic investor
” “
Helping Financial Institutions
to lend more…
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..by using our own capital to credit enhance
tranches of SME loans or lease securitisation
transactions placed on the capital markets “
” 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 2008
Guaranteeing senior and/or
mezzanine risk
tranches
Guarantee Instruments
Development 2013 and beyond
Risk tolerance
Deal rationale
Financial Institutions
Pricing
Leverage
Self-sustainability
Target Beneficiaries
7
Product Portfolio Tranche Form Leverage
SMEG
Risk Transfer
First Loss Direct guarantee
Counter - guarantee = 14
FLPG* First Loss + Second Loss Direct guarantee = 5 to 7
Credit Enhancement Second Loss (mezzanine) Direct guarantee = 6 to 8
RSI Blended (uncapped) Direct guarantee
Counter-guarantee = 5 (on EC FLPG)
ABS wrap Funding Senior Direct guarantee = 2 to 3
Expected
Loss
Expected
Loss
Expected
Loss Expected
Loss
Expected
Loss
SMEG
(First Loss)
FLPG
(First + 2nd Loss)
Credit Enhancement
(Second Loss)
RSI
(uncapped)
ABS wrap
(Senior)
*First loss product guarantee
EIF Guarantees & Securitisation
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“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 multi-
country/multi-originator transactions
“
”
”
Transaction Process
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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.
“
”
Originator
ABS Wrap Funding
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Senior tranche
FLP (retained)
Investor Issuer (SPV)
Sell of lease receivables
20-30%*
Arranger Legal counsel Reporting agent Back-up servicer Rating Agency ...
Purchase of Notes Guarantee
Other transaction parties:
* Indication for Germany and depending on credit risk of the portfolio
Originator Originator (s)
ABS Wrap Funding
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FLP (retained)
Investor
Issuer (SPV)
Originator Sell of lease receivables
20-30%*
Arranger Legal counsel Reporting agent Back-up servicer Rating Agency ...
Purchase of Notes
Guarantee
Other transaction parties:
* Indication for Germany and depending on credit risk of the portfolio
Senior tranche
Investor
EIB Group in ABSs Funding
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Requirements: true sale, static/replenishing,
up to 5 years WAL, senior tranche must be
rated AAA/AA+ by at least one agency
FLP (retained)
Size: EIB Group commitment can reach up to
EUR 375m, no minimum outside placement
required
+ Cash Investor
Pricing: at market conditions, but EIB
preferential rates and promotional requirements
apply (retrocession + allocations)
Credit Enhancement Risk transfer
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Senior (retained)
Mezzanine tranche
Transaction Portfolio (earmarked)
Originator
Arranger Legal counsel Reporting agent ……
Guarantee
Other transaction parties: FLP (retained)
Transaction Selection Criteria
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POOL CRITERIA
Eligible countries All EU Member States, Candidate and potential candidate countries (Turkey, Croatia, Western Balkans, etc.)
Obligor Entities SME (EU definition), Middle-market companies eligible, but to a limited extent
Credit Quality Credit quality supported by PD, LGD, or historical data
Pool diversification Granularity > 300 names, Max. obligor exposure of typically 50bps, industry diversification
UNDERWRITING CRITERIA
Minimum tranche rating BB (exceptionally BB-)
Max. amounts BB up to EUR 25m; BBB - AA up to EUR 30-100m; AAA up to EUR 150m (exceptionally EUR 200m for senior positions)
Max. term Up to 10 years WAL (exceptionally up to 15 years)
Our Team
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Alessandro TAPPI Head of Guarantees, Securitisation &
Microfinance Division
+352 24 85 81 352
Daniela
FRANCOVICCHIO [email protected]
+352 24 85 81 276
Roland KAMPE [email protected]
+352 24 85 81271
Ioanna-Victoria
KYRITSI [email protected]
+352 24 85 81 328
Georgi STOEV [email protected]
+352 24 85 81 375
European Investment
Fund 15 avenue J.F. Kennedy
L-2968 Luxembourg
www.eif.org
George Passaris Head of Securitisation Unit
+352 24 85 81 478
Vincent van Steensel Head of Risk Sharing Instrument (RSI)
+352 24 85 81351
Appendix: EIF - Mandate
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Excurse: Risk Sharing Instrument
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
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Risk covered by EIF as guarantor
EIF as
guarantor
Loan 1 Loan 2 Loan n
Guarantee Fee
Guarantee
Risk retained by the FIs
Financial Intermediary
Beneficiaries
SM
E 1
S.
Mid
-cap 1
SM
E n
Guarantee Rate: 50% of losses incurred in each loan
Min 20% economic exposure to be retained by FI throughout the
loan life
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Excurse: RSI Direct - Guarantee
structure
Excurse: RSI Counter - Guarantee
structure
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Guarantee Rate as per
the Financial
Intermediary standard
policy, but not higher
than 80%
Su
b-I
nte
rme
dia
ry
Guarantee
coverage
provided by the
Financial
Intermediary
Credit risk
retained by
the Sub-
Intermediar
y
Guarantee
from the
FI
Counter-guarantee
coverage provided by
EIF C
ou
nte
r-g
ua
ran
tee
fro
m E
IF
Portfolio of guarantees
EIF
as
Counter-
guarantor
Guarantee
Guarantee Fee
Uncapped
Counter-
guarantee
Counter-
Guarantee Fee
Portfolio of eligible loans/
leases
SUB-INTERMEDIARY FINANCIAL
INTERMEDIARY EIF
Fin
an
cia
l In
term
ed
iary
Portfolio of counter-
guarantees
Credit risk
retained by
the Financial
Intermediary
50% Counter-Guarantee Rate
on a guarantee by guarantee
basis