Download Hubert Cottogni_3rd Danube Financing Dialogue

European Investment Bank
Group (Bank & Fund)
Which financing instruments are offered to
project promoters in the Danube Region?
Hubert Cottogni, Deputy Director
& Head of Regional Business
Development, EIF
1
Overview of future EU-EIF financial
instruments
Central EU instruments
Research,
Development,
Innovation
Horizon 2020
Pilot Equity Facility for
Tech Transfer
(GIF successor)
SME and Small Mid Caps
Guarantee Facility for RI
(RSI successor) (700m)
EUR 3bn
Min. 1/3 (EUR 1bn) for
SME/small mid caps
Jobs, Growth and
Social Cohesion
Structural/Cohesion Funds
Competitiveness &
SME (COSME)
Instruments under Structural and
Cohesion Funds
Creative Europe
Cultural and Creative
Sector Guarantee Facility
121m
Social Change
& Innovation
(contribution of Member State (MS) funds from
Operational Programmes to centrally managed EU
programs)
Off-the shelf instruments
EUR 1.4bn
Equity Facility for Growth
EUR 690m
Loan Guarantee Facility
EUR 700m
EU level instrument
Erasmus for all
Tailor-made instruments
Student Loan Guarantee
Facility
517m
Significantly higher amounts than currently, but to be
decided by each MS
Progress Microfinance II
Social enterprise investing
EUR 192m
Source: EC, adapted
2
Financial fragmentation
FINACIAL CRISIS = banks are hesitant to lend in ‘risky’ countries
meaning that funding became expensive in these places.
(E.g. on average loans cost 1.6% more in Italy and Spain than in Germany)
•
In the Danube Region bank lending remains the main source of
funding for SMEs (with Venture Capital and other alternative
forms of financing remaining largely underdeveloped)
•
Due to the fact that the majority of banks in this region are
largely owned by Eurozone banks, the financial crisis has had
severe knock-on effects. Greek banks in particular continue to
own a significant share in economies in the Danube Region.
This means that SMEs with similar risk profiles are not able to borrow the same amounts in different
countries, simply because one country is perceived to be more ‘risky’ and thus the SMEs in that
country are not eligible for the same interest rates – this causes financial fragmentation.
Financial fragmentation = credit rationing in the SME market
3
How to improve access to
finance for SMEs in the region?
In an environment where banks have become more risk averse and are
concentrating on recapitalisation and deleveraging, access to finance for SMEs has
dried up. At the same time, precisely due to the financial crisis, SMEs have lost the
capacity to self-sustain and now need to seek external sources of funding
For example in the Western Balkans region, over 45% of micro and SMEs perceive
access to finance as a moderate to severe obstacle when doing business*.
The solution therefore, is to make risks & rewards acceptable to banks and in
parallel to build up new sources of finance such as venture capital and
mezzanine markets
*OECD et al. (2012) SME Policy Index: Western Balkans and Turkey 2012: Progress in the Implementation of the Small Business Act for Europe, OECD Publishing
4
European Investment Bank &
Fund: instruments offered
•
EIB is strongly committed to the implementation of the Danube Strategy
•
Out of the total EIB lending in 2012 (EUR 52bn) EUR 7.5bn was allocated to
the Danube region
LENDING, BLENDING AND ADVISING
EIB offers a wide range of financial products, including traditional loans to banks, cofinancing of EU grants, structured finance products (PPPs), specialised instruments
such as JESSICA and TA facilities such as JASPERS & ELENA. The EIB has also set up the
Budapest Danube Contact Point together with Hungary.
EIF offers:
•
•
•
•
multi product umbrella funds such as WB Enterprise Development and
Innovation Facility, JEREMIE in countries like Romania and Bulgaria
European programmes such as CIP, RSI, PROGRESS in future COSME, HORIZON
2020
direct support to regional equity and mezzanine funds
co-investment facilities
5
Guarantee Instruments
Development 2013 and beyond
Portfolio Tranche
Form
Leverage
SMEG
First Loss
Direct guarantee
Counter - guarantee
= 14
First Loss + Second Loss
Direct guarantee
= 5 to 7
Second Loss (mezzanine)
Direct guarantee
= 6 to 8
Blended (uncapped)
Direct guarantee
Counter-guarantee
FLPG*
Credit Enhancement
Risk Transfer
Product
RSI
ABS wrap
Funding
Risk tolerance
Deal rationale
Financial Institutions
Senior
Direct guarantee
Pricing
= 5 (on EC
FLPG)
Leverage
= 2 to 3
Target Beneficiaries
Self-sustainability
*First loss product guarantee
Expected
Loss
SMEG
(First Loss)
Expected
Loss
FLPG
(First + 2nd Loss)
Expected
Loss
Credit Enhancement
(Second Loss)
Expected
Loss
RSI
(uncapped)
Expected
Loss
ABS wrap
(Senior)
6
EIF crisis
response
toolbox
Equity Instrument Development
2013 and beyond
Social Impact Fund
Mezzanine Facility for Growth
Cohesion
Policy
Corporate Innovation Platform
Structural Funds / ESIF & JEREMIE
EIF as entrusted
entity for Horizon
2020 / COSME
European Angel Co-Investment Fund
COSME / Equity for Growth
Horizon 2020 / Equity for Research
and Innovation TT-POC-Start-up
Tech Transfer
Proof of Concept
Business Angels
Seed Stage
European Commission Resources
Early
Stage
EIB / EIF Resources
Expansion/
Development
Capital
Lower
Mid-Market
Member States / Private Sector Resources
7
Western Balkan Enterprise
Development and Innovation Facility
Improving access to finance in the Western Balkans region
WB EDIF Platform
is managed by the EIF and
is comprised of four different and scalable pillars
Improving
venture
capital
ecosystem
Improving
access to
finance
Enabling
integration
with EU
Policy
ENIF
ENEF
Enterprise
Innovation
Fund
A VC fund
focusing on
innovative SMEs
Enterprise
Expansion
Fund
EIF is currently in
the process of
selecting a Fund
manager
Supporting
established SMEs
with high growth
potential
Managed by the
EBRD with EUR
50m co-investment
facility
Target size:
EUR 40m
Target size:
EUR 100m
Guarantee
Facility
Guarantees are
provided to FIs to
incentivise them
to build up new
SME loan
portfolios
Generating a
loan volume
of over
EUR 110m
Technical
Assistance
Beneficiary
governments can
obtain support in
implementing
policy reforms to
foster a
favourable
regulatory
environment for
SMEs
Supporting
innovation
Promoting
the visibility
of region as a
market player
Backing
regulatory
reforms
8
Example: JEREMIE Bulgaria
A portfolio approach
EUR 392m Guarantees
EUR 350m
Holding Fund
EUR 60m Mezzanine
EUR 300m Funded Products
5 different financial
products are being
deployed
Co-investment Product – negotiations underway
Via 12 different
financial
intermediaries
Producing a
leveraging effect of
x 2.5
EUR 20.3m Venture Fund
EUR 22.6m
Accelerator/Seed Fund
PRE-SEED PHASE
Allowing for a
revolving nature to
HIGHER RISK
the funds
SEED PHASE
START-UP PHASE
EMERGING GROWTH
DEVELOPMENT
SME Development Stages
Debt products
Equity products
Product
under development
LOWER
RISK
9