AAL Investment Forum 2010 - View from the European Investment Bank

2,133 views

Published on

Hristo Stoykov, European Investment Bank, Luxembourg

Published in: Health & Medicine
  • Be the first to comment

AAL Investment Forum 2010 - View from the European Investment Bank

  1. 1. European Investment Bank AAL Investment Forum September 14th, 2010 Odense, Denmark New Products & Special Transactions | European Investment Bank
  2. 2. European Investment Bank Disclaimer This Presentation is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by the European Investment Bank (“EIB”). The terms and conditions are intended as an outline for discussion purposes only and made on an indicative basis. All figures set forth in this Presentation are subject to change, to a satisfactory due diligence and to all necessary internal approvals of EIB (in particular of its credit committees).   The information in this Presentation reflects the prevailing conditions and the view of EIB as of this date and are accordingly subject to change and based on carefully selected sources believed to be reliable. EIB has not independently verified this information and does not make any representation or will be liable that such information is accurate, valid, timely and complete.   This Presentation is provided without any liability whatsoever by EIB and shall not constitute any obligation of EIB to extend credit facilities to the Company or to carry out a due diligence review of the aspects relevant for the financing of the Project.   Neither this presentation nor any of its contents may be duplicated, published or used for any other purposes without the prior written consent of EIB.   European Investment Bank 14/09/2 New Products & Special Transactions | European 2
  3. 3. European Investment Bank Agenda European Investment Bank Overview of ICT financing Risk Sharing Finance Facility Financing Models and Concepts Typical Loan Process Summary & Contact Details 14/09/2 New Products & Special Transactions | European 3
  4. 4. European Investment Bank Profile The European Investment Bank is the European Union‘s long-term financing institution. The Bank acts as an autonomous body set up to finance capital investments furthering European integration by promoting EU policies. EIB was created by the Treaty of Rome in 1958 EIB is a not-for-profit, policy driven institution EIB is 100% owned by the 27 EU member states EIB has subscribed capital of EUR 232.4 bn as of 2009 EIB is AAA/Aaa rated by Moody’s, S&P and Fitch with stable outlook EIB funds itself on the capital markets: EUR 79.4 bn in 2009 EIB signed loans amounting to EUR 79.1bn in 2009 (c.93% in EU) EIB is the largest multilateral financing institution EIB is the majority shareholder in the European Investment Fund 14/09/2 New Products & Special Transactions | European 4
  5. 5. European Investment Bank Lending and Own Capital Figures (as of end-2009) Lending Own Capital FYE 2009 14/09/2 New Products & Special Transactions | European 5
  6. 6. European Investment Bank General Organizational Structure Board of Governors 27 members Audit Committee Board of Directors 28 Directors (18 Alternates) + up to 6 experts Management Committee President of the EIB + 8 Vice-Presidents EIB Group Compliance Office OCCO IG SCC SG-JU RH Ops A Ops B FI PJ RM TMR Inspectorate Strategy and General Human Operations Operations Finance Projects Risk Management Transaction General Corporate Secretariat Resources in the EU and outside the Directorate Directorate Directorate Management and Centre Candidate EU and Restructuring Legal Affairs Countries Candidate Countries 14/09/2 New Products & Special Transactions | European 6
  7. 7. European Investment Bank Policy Objectives 1. Within the European Union • Cohesion and convergence • Small and medium-sized enterprises (SMEs) • Environmental sustainability • Knowledge Economy • Trans-European Networks (TENs) • Sustainable, competitive and secure energy 1. Outside of the European Union Private sector development Infrastructure development Security of energy supply Environmental sustainability Support for EU presence in Asia and Latin America via Foreign Direct Investment (FDI) 1. Under EU Mandates Pre-accession European Neighborhood Development 14/09/2 New Products & Special Transactions | European 7
  8. 8. European Investment Bank Interaction with the EU Institutions European Council Court of Auditors ECOFIN Cooperation Agreement on external Financial Counsellors Group control of EU funds managed by the EIB Other working groups European Parliament Regular interaction with Address to plenary session Economic and Social Committee Report on annual report of EIB Committee of the Regions Parliamentary questions Court of Justice EMAC and other committees European Commission One Board Member and one Alternate Commission opinion on all projects Coordination with Directorate-General for Economic and Financial Affairs Staff operational contacts Memoranda of Understandings (MOUs) on key policy issues Full partner in EU programming activities 14/09/2 New Products & Special Transactions | European 8
  9. 9. European Investment Bank Current Initiatives to complements EIB’s lending instruments Initiatives with the European Commission: RSFF – Risk-Sharing Finance Facility for higher-risk promoters JASPERS – Joint Assistance to Support Projects in European Regions to prepare projects supported by EU Structural and Cohesion Funds JEREMIE – Joint European Resources for Micro-to-Medium Enterprises in the regions to encourage more business start-ups and new ventures. Managed by the EIF JESSICA – Joint European Support for Sustainable Investment in City Areas for investment in sustainable urban development Other Initiatives: ECTF – European Clean Transport Facility (approved by Ecofin) SFF – Structured Finance Facility established by EIB in 2001 to support sub-investment grade projects CCF – Carbon Credit Funds created in collaboration with institutions such as EBRD and World Bank ELENA – European Local ENergy Assistance technical assistance facility financed through the Intelligent Energy Europe programme Infrastructure Funds 14/09/2 New Products & Special Transactions | European 9
  10. 10. European Investment Bank EIB/EIF investment cycle coverage Risk Capital CIP Resources (SME) RSFF (SME / MidCap) Investment Loans Facility: High Growth Competitivness and RSFF Investment Loans Innovative SME Scheme Innovation Program (GIF), Ecotech (CIP) Guarantee Innovation financing RDI financing schemes Purpose: IP financing, SMEs/MidCaps, Banks, MidCaps/Large technology transfer, Growth financing for PE Investors (sub- Corporates/Public seed financing, SMEs investment grade) Sector Entities investment readiness (investment grade) Formal VC Funds, Loans (incl. Mezzanine), Target Group: VC CLOs Funded Risk Sharing Guarantees Funds, Business Angels Facilities with Banks SME guarantees (loans, (Investors) Special Operations EIF Product: Fund-of- microcredit, Funds equity/mezzanine, Special Operations securitisation) Bank Loans and Guarantees Formal VC Funds Seed/Early Stage VC Funds Business Angels Entrepreneur, friends, family EIF EIB Later Stage Seed / Start-Up Phase Emerging Growth Phase Development Phase Counterparts 14/09/2 New Products & Special Transactions | European 10
  11. 11. European Investment Bank Agenda European Investment Bank Overview of ICT financing Risk Sharing Finance Facility Financing Models and Concepts Typical Loan Process Summary & Contact Details 14/09/2 New Products & Special Transactions | European 11
  12. 12. European Investment Bank EIB support for the Lisbon Agenda and ICT Transactions in particular Lisbon Agenda: EUR 86.7bn loans signed since launch in 2000 1996-2008 period: Number of ICT projects* - 155 (left) and loan volume – EUR 31bn (right) 0.5% 0.5% 0.5% 3.0% 0.5% 11.0% 11.0% 13.0% 75.0% 85.0% Telecoms Telecom equipment manufacturing Telecoms Telecom equipment manufacturing Media PC & office equipment manufacturing Media PC & office equipment manufacturing Softw are, consultancy, data processing Softw are, consultancy, data processing * Including Lisbon Agenda and RSFF 14/09/2 New Products & Special Transactions | European 12
  13. 13. European Investment Bank Agenda European Investment Bank Overview of ICT financing Risk Sharing Finance Facility Financing Models and Concepts Typical Loan Process Summary & Contact Details 14/09/2 New Products & Special Transactions | European 13
  14. 14. European Investment Bank Risk Sharing Finance Facility – Policy Objectives General Policy Objective of the Renewed Lisbon Strategy (2008-10): “Transform EU into the world’s leading knowledge – based economy” RDI gaps in Europe  Average corporate R&D spending as % of GDP in US & Japan is around 3%, in Europe it lags significantly at levels around 1.5%  Innovative companies investing much in RDI (Capex + Opex) have more difficulties securing stable financing at acceptable rates Solution EIB to fill the gap left by the commercial banks by providing tailor-made financing solutions to innovative European companies rated BBB- and below EIB and EC commit EUR 1.0bn each of provisioning capital to set up the “Risk Sharing Finance Facility”. The EUR2bn capital is later levered up to EUR 10bn by EIB (see next slide) 14/09/2 New Products & Special Transactions | European 14
  15. 15. European Investment Bank Risk Sharing Finance Facility – Set-up EUR 1bn RSFF EUR 1bn European [up to EUR 10bn assuming Commission leverage of 5.0x ] Own Resources Direct Lending Indirect Lending / Financing 1 Corporate Lending 2 Financial Intermediaries Senior Secured (extend lending capacity) Risk Sharing Second Lien Co-financing Senior Unsecured Junior Unsecured PIK loans Mezzanine, etc. 3 Investment Funds Renewable Energy Others Project Financing 4 Collaboration with EIF Universities Banks Other: SPVs, PPPs, JTIs … Funds 14/09/2 New Products & Special Transactions | European 15
  16. 16. European Investment Bank Risk Sharing Finance Facility – Scope of work Geographic Scope: EU 27 and FP7 Associated countries (Switzerland, Israel, Norway, Iceland, Lichtenstein, Turkey, Croatia, FYROM, Serbia, Albania, Montenegro, Bosnia & Herzegovina, Faroe Islands) RDI Scope: fundamental research, definition stage/feasibility studies, industrial research, pre- competitive development activity, pilot and demonstration projects, and innovation (under EIB window) Industry Scope: Engineering, Automotive, Life Sciences, Energy, ICT and RDI Infrastructure (e.g. Fiber optic networks) Reporting: monthly, quarterly, semi-annually, annually by EIB/NPST to DG RTD and/or DG ECFIN 14/09/2 New Products & Special Transactions | European 16
  17. 17. European Investment Bank Risk Sharing Finance Facility – Benefits for Beneficiaries Pricing advantage (EIB’s AAA rating and non-for-profit pricing) Long maturities of up to 10 years Direct EIB financing from EUR 7.5m up to EUR 300m per transaction Strong technology/industry expertise EIB does not sell assets on the secondary market (buy and hold strategy) Relationship with co-financing partners: no cross selling of other products (just long-term lender) Signalling Effect: EIB as a quality stamp Diversification of funds Note: EIB products are not grants but loan products 14/09/2 New Products & Special Transactions | European 17
  18. 18. European Investment Bank Agenda European Investment Bank Overview of ICT/NGN financing Risk Sharing Finance Facility Financing Models and Concepts Typical Loan Process Summary & Contact Details 14/09/2 New Products & Special Transactions | European 18
  19. 19. European Investment Bank Financing Concept under RSFF – Definition of “Eligible Project Costs” “The Project” is an internal EIB definition of EIB Loan Capex/Opex expenses over 3-5 years min EUR 7.5m – max EUR 300m falling within certain eligibility criteria of the Bank. From a credit perspective, it could be Company defined as a “Borrowing base” of which up to 50% could be financed by EIB proceeds. Eligible Costs 2010 2011 2012 € 25m € 27m € 30m If all project costs presented by the R&D Salaries company are deemed “eligible” (to be R&D Capex € 35m € 40m € 45m confirmed during the due diligence R&D Opex, etc. € 5m € 7m € 8m meeting) and thus included in the project definition, EIB will be able to provide a Total Annual € 65m € 74m € 83m facility with a maximum amount equal to the lowest of: Total Project € 222m 50% of project costs, i.e. EUR 28.5m, and 1 Min EIB Loan € 7.5m the applicable rating limits; 2 Max EIB Loan € 111 m (50%) The remainder of the project costs is to be covered though other financings or through operating cash flows 14/09/2 New Products & Special Transactions | European 19
  20. 20. European Investment Bank Financing Models under RSFF Co- Financing 1: Co- Financing 2: 2 3 Refinancing Guarantee + Refinancing EIB (RSFF) Financing Partners EIB (RSFF) Financing Partners EIB Loan Financing Financing 1 Agreement(s) Agreement(s) Agreement Company Company Bilateral Lending: EIB can participate in transactions usually through an EIB direct loan agreement. However, EIB typically prefers to co-finance with other financing partners (e.g. commercial banks, investors) In the case of co-financing EIB can provide a loan in parallel to the financing partners directly with the final beneficiary (with key contractual terms aligned) OR… …can provide a guarantee to the financing partners and thereby share the credit risk and enable capital relief. The guarantee can also be complemented by EIB funding (in order to generate additional Financial Value Added) Syndicated Lending: EIB can participate in syndicates, though some limiting factors can apply (i.e. EIB cannot extend funding to HoldCos in acquisition structures, only to OpCos; EIB still needs a side agreement that the company will execute the defined project, etc.) 14/09/2 New Products & Special Transactions | European 20
  21. 21. European Investment Bank Agenda European Investment Bank Overview of ICT/NGN financing Risk Sharing Finance Facility Financing Models and Concepts Typical Loan Process Summary & Contact Details 14/09/2 New Products & Special Transactions | European 21
  22. 22. European Investment Bank Loan Process – Counterparties Company Main relationship point Due diligence and project Mainly contract negotiations eligibility evaluation EIB Team Structured Finance & Project Directorate Legal Services Advisory Loan Officer: origination, Economist/Engineer: economic, Internal/External Lawyers: legal structuring, financial analysis regulatory and technical analysis due diligence, contract negotiation Risk Management Treasury, Other … Indirectly involved: Credit risk management, pricing Funding, disbursement, EC & monitoring opinions, etc. 14/09/2 New Products & Special Transactions | European 22
  23. 23. European Investment Bank Loan Process – Typical Project Timeline 14/09/2 New Products & Special Transactions | European 23
  24. 24. European Investment Bank Agenda European Investment Bank Overview of ICT/NGN financing Risk Sharing Finance Facility Financing Models and Concepts Typical Loan Process Summary & Contact Details 14/09/2 New Products & Special Transactions | European 24
  25. 25. European Investment Bank Summary & Contact Details EIB is the triple-A rated, not-for-profit, independent financing arm of the EU EIB provides support to viable projects which fall within the EU policy objectives EIB resources represent attractive additional source of funding for innovative R&D intensive European companies Key benefits of EIB financings are: (i) attractive pricing; (ii) longer maturities; (iii) loan sizes up to 50% of project costs (or EUR 300m for RSFF/SFF financing); (iv) no cross-selling or other products and no sells on secondary market; (v) strong technology and sector competences; (vi) signaling effect Contacts: http://www.eib.org Hristo Stoykov Structured Finance & Advisory Phone: (+352) 4379 87005 Fax: (+352) 4379 67292 email: stoykov@eib.org European Investment Bank 100, boulevard Konrad Adenauer L-2950 Luxembourg 14/09/2 New Products & Special Transactions | European 25

×