Post on 04-May-2018
Financial Instruments under EU
Programmes (COSME, H2020)
TAIEX Workshop- Belgrade, March 2016
EIF at a Glance
EU specialised institution for SMEs risk financing
• Debt - Structuring and Guaranteeing portfolios of SME
loans/leases and microcredit
• Equity - Venture Capital and Mezzanine (fund of funds)
• Founded in 1994 & started providing
VC to businesses in 1997
• Multilateral Development Bank
(MDB) status
• Basel II 0% risk weighting
• Aaa/AAA/AAA ratings
(Moody’s/S&P/Fitch)
Geographic Focus: EU 28,
EFTA, Candidate Countries
Distribution through Banks
and Funds (Full delegation)
• Shareholding Structure:
• EIB: 61.3%, EIB shareholders: 28 EU Member States
• European Commission: 26.5%
• 29 European Financial Institutions: 12.2%
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2
Helping businesses
at every stage of their development
3
SME Development Stages
DEVELOPMENT
HIGHER RISK LOWER RISK
Business Angels,
Technology Transfer
Microcredit
VC Seed & Early Stage
Portfolio Guarantees & Credit Enhancement
VC Funds, Lower Mid-Market & Mezzanine Funds
PRE-SEED PHASE SEED PHASE START-UP PHASE EMERGING GROWTH
Social Impact Funds
Public Stock Markets
EIF Financing under EU programmes
4
SME Development Stages
PRE-SEED PHASE SEED PHASE START-UP PHASE EMERGING GROWTH DEVELOPMENT
HIGHER RISK LOWER RISK
Public Stocks
SME Initiative
InnovFin SME Guarantee
ERASMUS+ Student loans
Cultural and Creative Sector Guarantee Facility*
Guarantees & Debt Programmes
Equity Programmes COSME Equity Facility for Growth
InnovFin Tech Transfer*
InnovFin SME Venture Capital
EaSI* (Employment & Social Innovation)
EIB InnovFin products**
COSME Loan Guarantee Facility
* Not yet signed
** InnovFin MidCap Guarantee
InnovFin MidCap Growth Finance
InnovFin Large Projects
Equity Instruments
Innovfin SME Venture Capital
COSME EFG
Single EU Equity Financial Instrument
6
EIF’s role in the equity market
Early support in Fundraising
Quality Stamp
Improvement to Terms and Conditions
Promotion of best corporate governance practice
Transparency
Support to Emerging Teams
Long-term support
EQUITY: Involved throughout the
business cycle
7
Lower
Mid-Market
Expansion/
Development
Capital
Early
Stage
Business Angels
EIF
Cu
rre
nt
Inve
stm
en
t F
ocu
s
Str
ate
gic
Cha
llenge
s
Technology Transfer
Proof of Concept
Business Angels
Seed Stage
Technology
Transfer Accelerator
Catalyse hybrid debt
finance for growth
Support VC
ecosystem
and decrease
dependency
on public finance
Fill funding gap left by
institutional investors
Provide instruments to
stimulate innovation,
competitiveness
and entrepreneurship
Investing in
VC funds Investing in
Growth Capital
Mezzanine
European Commission Resources EIB / EIF Resources Member States / Private Sector Resources
Business development
Single EU Equity Financial Instrument
8
Single EU Equity Financial Instrument
“Supporting Union enterprises’ growth and research and innovation from the early-stage to
growth and expansion”
PRE-SEED
PHASE
SEED PHASE START-UP
PHASE
EMERGING
GROWTH
DEVELOPMENT
Multi-Stage funds – InnovFin SME VC & COSME
EXPANSION
COSME Equity Facility for Growth (EFG)
(up to EUR 630M)
EU 28, Iceland, Montenegro, Turkey, FYROM, Albania,
Serbia
InnovFin SME Venture Capital
(EUR 430M + EUR 30M BA ICT pilot)
EU 28, Norway, Albania, Bosnia and Herzegovina,
FYROM, Montenegro, Serbia, Turkey, Israel, Moldova,
Faroe Islands, Ukraine
LOWER RISK HIGHER RISK
InnovFin Platform
9
InnovFin SME Venture Capital – key features
10
VC and BA Funds
focusing on companies
in Early Stage
Focus on Horizon 2020
objectives
(e.g. ICT, life sciences,
clean energy,
technology)
Enterprises in pre-seed,
seed, start up phases
(seed & A rounds
included)
Open Call for
Expression of Interest
until 30/09/2020
Investment size
up to EUR 30m
up to 50%** of total
commitments
(CATALYTIC)
Pari-passu, at least
30%*
investment from private
investors
* 10% in the case of BA Co-investment Funds ** Up to 70% in the case of BA Co-investment Funds, subject to conditions.
InnovFin Intermediaries & Final Recipients
11
Eligible Final Recipients
Enterprises, Spin-off, Projects
Eligible Financial Intermediaries
BA, VC, PE funds
EU 28 &
Horizon
2020
Associated
Countries
early
stage
InnovFin
Excluded
early
stage
focus
EU 28 &
Horizon
2020
Associated
Countries
Horizon
2020
objectives
InnovFin BA ICT pilot BA Funds focusing on ICT investments ≥ 50% of investable amounts into ICT Final Recipients Focus on Final Recipients in CEE Countries Co-investments with groups, syndicates or networks of BAs
specific terms & conditions
At the time of 1st investment
COSME EFG – Key features
12
Investment funds/vehicles,
private equity funds
Focus on companies in their expansion &
growth phase Sector generalist
Pari-passu, at least 30%
investment from private investors
Addressing Multi-stage funds with InnovFin SME VC (single Call for EI)
Investment size up to EUR 30m
Up to 25% of total commitments
COSME Intermediaries & Final Recipients
13
Eligible Final Recipients
SMEs
Eligible Financial Intermediaries
BA, VC, PE funds
EU 28 &
COSME
Associated
Countries
Growth/
expansion
stage
Excluded
Growth
/expansion
stage focus
EU 28 &
COSME
Associated
Countries
At the time of 1st investment
InnovFin SME VC - COSME EFG synergies
14
100% 75% 50% 0%
Early
Stage
COSME Eligible
100% 0% 50% 75% Growth &
Expansion
InnovFin SME VC Eligible
split ex ante Multi-stage
Company with a product or service and has
generated revenues (but not necessarily
profit)
First stage of development of an enterprise
(Pre-) Seed-Stage & Start-Up Stage
15
Selection and investment process
FI
EUequityInstrument@eif.org
Application/Investment Proposal
EIF
Send acknowledgement of
receipt
EIF Assessment Process
First/Second Screening
Appraisal Authorisation
Due Diligence
EIF Board
Legal Negotiation/Signature
EC
EC non objection
Policy fit
* Applications received through EIF customary channel
dealflow.inv@eif.org are considered as well
Call for Expression of Interest*
Debt Instruments
Innovfin SME Guarantee
COSME LGF
InnovFin Product Overview
17
InnovFin SME Guarantee
■ Responsible EC Service/Timeframe: DG Research & Innovation / 2014 - 2020
■ Target over EUR 10bn of financing to benefit innovative SMEs and Small Mid-Caps
over the next 7 years
■ Purpose: improve access to finance for innovative SMEs and Small Mid-Caps
■ EIF provides direct (and indirect) financial uncapped guarantees to selected
Financial Intermediaries (FIs)
■ Guarantee Rate: up to 50% of losses incurred in each loan
■ Thanks to EIF Multilateral Development Bank status (MDB) and pursuant to Basel II,
no capital charge expected on the covered part of the Portfolio
■ Transfer of benefit and acceptable portfolio risk profile
■ Capacity of InnovFin has been boosted during 2015-2017 in anticipation of the
implementation of the European Fund for Strategic Investment (EFSI)
■ EUR 2.8bn guarantees signed as of March 2016, covering SME and small-midcap
portfolio volume of EUR 6.5bn spread across 24 countries
18
Distribution of InnovFin across EU
Status of InnovFin implementation: (as of March-16)
■ 67 applications
59 for the direct guarantee
8 applications for the
counter-guarantee
■ 44 guarantee contracts signed
covering 24 countries
for a total guarantee
amount of EUR 2.8bn
Enabling over EUR 6.5bn of
loans/ leases to innovative
SMEs and small mid-caps
Overview of signed
contracts across
Europe (as of March
2016)
19
InnovFin - Focus
Eligible financing:
New loans, credit lines, bonds (such as mini-bonds) and/or financial leases;
to be originated within a two-year period by the selected intermediary (up to Dec.
2022 under H2020 programme)
Eligible debtors:
SMEs (EC definition) and Small Mid-caps (< 500 FTE employees);
Operating in EU-28 and H2020 Associated Countries; and
Innovative
invest in producing or developing innovative products, processes and/or
services and where there is a risk of technological or industrial failure; or
“innovative” SMEs/Small Mid-caps, i.e. satisfying at least one of a list of pre-
defined criteria;
“fast growing enterprises”, measured by employment or by turnover: annual
increase > 20%
Can be combined with EIB funding facilities (subject to specific criteria and transfer of
benefit requirements) 20
Underlying Transaction Criteria
Loan amount: min EUR 25k - max EUR 7.5 m (only Senior Debt)
Loan maturity: min 1 year - max 10 years
Currency: EUR and local currency
Max (counter-)guarantee amount is EUR 200m per intermediary
(EUR 500m per intermediary group)
Purpose of Financing (Term Loans/Leases + Revolving Credit Facilities):
Tangible & Intangible
Assets
Working Capital
Business Transfers
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Key Guarantee Terms
Up to 50% loss coverage
(Principal + Interest 90D)
Full Delegation to Financial
Intermediaries
Automatic Coverage/ Inclusion
Attractive Guarantee
Terms
Favourable Capital
Treatment
Guarantee and Counter-
guarantee
22
Key Guarantee Terms
Payable either quarterly based on the average portfolio balance or up-front
(based on an amortisation schedule)
Financial Intermediaries are required to transfer the Financial Benefit to SMEs
& Small Mid-caps:
reduced interest rate (direct guarantees)
reduced guarantee fee premium (counter-guarantees)
Guarantee Fee: SME
0.50% p.a.
Guarantee Fee: Small Mid-Cap
0.80% p.a.
23
Guarantee payment can be structured either as (i) an upfront payment of the defaulted
exposure amount and pro-rata sharing of the recoveries, or (ii) a payment of the net loss
at the end of the recovery work-out process.
Direct - Guarantee structure
Fin
an
cia
l In
term
ed
iary
Guarantee
from EIF
Guarantee coverage
provided by EIF
Gg
ua
ran
tee
fro
m E
IF
Portfolio of Final
Recipient Transactions
EIF
as
Guarantor
Uncapped
Guarantee
Guarantee Fee
EIF
Portfolio of Guarantees
Credit risk
retained by the
Financial
Intermediary*
Up to 50% guarantee rate on a
loan by loan basis
• Additional external credit protection may be obtained by the Financial Intermediary. At any time the economic
exposure retained by the Financial Intermediary towards any Final Recipient Transaction must not be lower than 20%
of the principal amount outstanding.
24
InnovFin Selection Process
Selection of FIs through a Call for Expression of Interest published on
4 August 2014 on EIF website
http://www.eif.org
Application assessed on a « first come, first processed » basis by EIF
Selection procedure:
Pre-selection of Expression of Interest based on the evaluation
criteria
Due diligence exercise of pre-selected Applicants
Transaction proposal
25
COSME LGF – Loan Guarantee Facility
Successor of the CIP SME Guarantee Facility as part of the Europe 2020 strategy
EC facility enhancing access to finance for European SMEs
Call launched in August 2014 with an estimated budget of EUR 690m (2014 - 2020)
COSME LGF provides:
Free of charge capped portfolio guarantees and counter-guarantees for
additional SME risk-taking
A securitisation option on mezzanine tranches of SME debt portfolios subject to
additional lending to SMEs
COSME LGF is implemented through Financial Intermediaries like guarantee schemes,
banks and leasing companies
Thanks to COSME LGF, Financial Intermediaries go beyond their current lending or
guarantee practice or increase lending volumes
26
COSME LGF country coverage to date
28 agreements signed for EUR 10bn of SME financing for
an aggregate budget allocation of EUR 332m
17 Countries where agreements have been signed
Financial Intermediaries are:
- AWS, Austria
- BdM-MCC- Fondo di Garanzia, Italy
- BGK, Poland
- Buergschafstbanken, Germany
- CdP-SACE, Italy
- CERSA, Spain
- CIBANK, Bulgaria
- CKB, Montenegro
- CMZRB, Czech Republic
- Credito Emiliano, Italy
- EZBOB, UK
- Flemish Participation Fund (PMV), Belgium
- France Active Garantie, France
- GE Capital Equipement Finance, France
- IdeaBank, Poland
- Iwoca, UK
- K&H, Hungary
- KfW, Germany
- Kredex, Estonia
- LfA, Germany
- Libra Internet Bank, Romania
- MicroBank, Spain
- Qredits, Netherlands
- Raiffeisen Leasing, Poland
- Slovene Enterprise Fund, Slovenia
- SOCAMA, France
- SOWALFIN, Belgium
- Vaekstfonden, Denmark
27
+0 Countries where transactions have been approved
+5 Countries where applications have been received
COSME LGF capped (Counter-)
Guarantee Structure
28
Guarantee Rate
on a loan by loan basis
50% maximum
Guarantee
Cap Rate
Expected
Loss
Risk retained by
the Financial
Intermediary
20% minimum*
of the original
portfolio
* The minimum 20% level is based on the consideration that financial intermediaries could combine additional credit risk protection financial instruments alongside with
the proposed COSME (counter-)guarantees
Financial Intermediary’s Portfolio of Higher Risk
Transactions to SMEs
COSME LGF’s capped (counter-) guarantee
proposed features
Structured in the form of guarantees or
counter-guarantees
(Counter-) Guarantee rate typically set at
maximum 50%
Pari-Passu ranking
(Counter-) Guarantee cap rate fixed at the
level of Expected Losses (max 20%)
COSME guarantee has 10 year maturity
Eligible loans min 12 months maturity
Retained exposure of the Financial
Intermediary to the SME transactions needs
to be min 20%*
Final Recipient Transactions:
Amount: up to a maximum of EUR 150,000 – larger transactions can be included
provided that the Final Recipient does not fulfil any of the 12 InnovFin Innovation
Eligibility Criteria
Maturity: minimum 12 months
Purpose:
- Working capital (including revolving credit lines – maximum maturity of 5 years
– and overdrafts; excluding factoring and credits or loans resulting from
utilisation of credit card limits)
- Investments
Final Recipients:
SMEs as defined in Commission Recommendation 2003/361/EC (OJ L124,
20.05.2003, p. 36)
Established in one of the COSME programme countries
They should not be “undertakings in difficulty“ as defined in “General block
exemption regulation“ (Commission regulation (EU) No C(2014) 651/2014,
17.06.2014) 29
COSME LGF – Eligibility Criteria
COSME LGF covers Higher Credit Risk Transactions to SMEs of two types:
30
Option 1
Target Higher Risk Profile clients/products through:
- New product set up for Start-ups; OR
- Extension in maturities and/or reduction in collateral; OR
- New products or existing products offered to previously excluded
client sectors
Ground up COSME cover
Increase in volumes of (guarantees of) loans to SMEs related to
- most risky 25% of current portfolio by internal rating; OR
- full portfolio in case of guarantee institutions and promotional
banks
COSME cover is conditional on the Intermediary realising certain volumes
of activities as defined within the Guarantee Agreement
Option 2
“Unconditional”
guarantee
“Conditional”
guarantee
What are Higher Credit Risk Transactions under
COSME LGF?
31 *COSME is open to candidate, potential candidate and neighborhood policy countries **Signed Declaration of Honour + full Application submitted
Financial Intermediaries established and operating in one of the 28 Member States +
Iceland, FYROM, Montenegro, Turkey, Albania and Serbia (further countries still expected until
year-end)*can apply to the Open Call for Expression of Interest to benefit from a COSME LGF
product
Open Call published and open until September 2020
http://www.eif.org/what_we_do/guarantees/single_eu_debt_instrument/cosme-loan-
facility-growth/index.htm
A1 B1 C1
A2 B2 C2
A3 B3 C3
Pre-Selected
On the Reserve List
Not Pre-Selected
QUALITY (A to C)
IMPA
CT (1
to
3
)
First-come, first-served - evaluation based on:
Compliance with formal criteria**
Quality
Impact
Due diligence meeting
Requirement of further information if necessary
Revised Quality and Impact score
Open Call for
Expression of
Interest
Application
Pre-Selection
Due Diligence
Final Selection
GUARANTEE
AGREEMENT
3 to
6
m
onth
s
(dependin
g o
n q
uality
of receiv
ed in
form
ation)
If Pre-selected
Proposal to EIF Board for approval (subject to EC veto right)
Negotiations and agreement implementation
COSME selection process and workflow
Contact – EU Single Equity Instrument
37B, avenue J.F. Kennedy
L-2968 Luxembourg
T :(+352) 24851
www.eif.org
EIF
Tomasz Kozlowski
Head of Innovation & Alternative Financing
Phone: (+352) 248 581 382
email: t.kozlowski@eif.org
Minerva Elias
Manager Innovation & Alternative Financing
Phone: (+352) 248 581 750
email: m.elias@eif.org
Contact details – COSME LGF
EU Guarantee Facilities Team
EUROPEAN INVESTMENT FUND
37B, avenue J.F. Kennedy
L-2968 Luxembourg
@ www.eif.org
Gunnar Mai - Head of EU Guarantee Facilities +352 2485 81358 g.mai@eif.org
Luís Broegas Amaro +352 2485 81438 l.amaro@eif.org
Vasco Campilho +352 2485 81789 v.campilho@eif.org
M. Chiara Amadori +352 2485 81629 c.amadori@eif.org
Gabriela Mates +352 2485 81603 g.mates@eif.org
Zöe Brejon de Lavargnée +352 2485 81744 z.brejon@eif.org
Priscilla Schnepper +352 2485 81719 p.schnepper@eif.org
Kiril Stoychev +352 2485 81791 k.stoychev@eif.org
Contacts
37B, avenue J.F. Kennedy
L-2968 Luxembourg
T :(+352) 24851
www.eif.org
Vincent van Steensel
Head of Portfolio Guarantees
Phone: (+352) 248 581 351
email: v.vansteensel@eif.org
EIF
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Alicia Hlibowicka a.hlibowicka@eif.org +352.24.85.81.641
Diego Lucero d.lucero@eif.org +352.24.85.81.658
Jiri Chaloupka j.chaloupka@eif.org +352.24.85.81.748
Paul Samsonoff p.samsonoff@eif.org +352.24.85.81.587
Ricardo Frazão r.frazao@eif.org +352.24.85.81.804
Roland Kampe r.kampe@eif.org +352.24.85.81.271
Sandrina Da Cruz s.dacruzaraujo@eif.org +352.24.85.81.743
Stefano Bragoli s.bragoli@eif.org +352.24.85.81.651
Teodor Radonov t.radonov@eif.org +352.24.85.81.518
Zvonimir Ratkovski z.ratkovski@eif.org +352.24.85.81.737
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