Gunnar Mai - EIF AECM Annuale Meeting 2014 - Istanbul

1. COSME
SME Guarantee Facility
AECM, Istanbul
16 October 2014

2. ■ Successor of the CIP SME Guarantee Facility as part of the Europe 2020 strategy
■ Call launched on 4th August 2014
■ Estimated budget: EUR690m (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
■ COSME LGF targets Higher Credit Risk Transactions with SMEs resulting in Enhanced
Access to Finance for them
■ Through COSME LGF, Financial Intermediaries provide further support SMEs by going
beyond their current lending/guarantee practice or increase lending volumes
COSME Loan Guarantee Facility (LGF)
2

3.  70 Agreements signed
 24 Countries covered
 347,000 SMEs supported
 EUR 558m of committed budget
 EUR 17.8b of mobilised lending
 >30 Leverage
As of 30 June 2014, CIP has achieved the following milestones, with many agreements
still open for inclusions:
Further 3 transactions were signed in Q3 2014
CIP Achievements
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4.  COSME LGF counts on a single flexible window providing capped guarantees and a
securitisation option
 Capped (counter-)guarantees would be provided at a guarantee rate of up to 50% and a
guarantee cap rate fixed at the level of Expected Losses (max 20%)
 COSME LGF can cover investment and/or working capital financing, leasing, credit lines
and bank guarantees
 COSME LGF is State Aid consistent, i.e. it does not contain State Aid
(“de minimis” limits are translated in agreement i.e. max guaranteed loan amount of EUR 1.5m)
 A maximum loan amount threshold of EUR 150,000 applies - larger loans can only be covered
under the COSME LGF if the SME borrower does not meet any of the 12 InnovFin criteria
 Financial Intermediaries have two options to provide additional risk taking:
 Launch of a new more risky product (e.g. without collateral, start-ups) with ground up for
COSME cover, and
 Substantial increase in volumes to high risk SMEs, with a Reference Volume
COSME LGF vs. CIP – What’s new?
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5. What are Higher Credit Risk
Transactions under COSME LGF?
 COSME LGF covers Higher Credit Risk Transactions to SMEs, which may be defined through two
options, as follows:
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
 Increase in volumes of (guarantees of) loans to SMEs related to
- entire guarantee or loan portfolio of guarantee institutions
or promotional banks; OR
- most risky 25% of current portfolio by internal rating
Option 2
“Unconditional”
guarantee
“Conditional”
guarantee
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6. Conditionality under COSME
Mechanics
6
Option 2 – Conditional GuaranteeOption 1 – Unconditional Guarantee
Expected Loss Cap amount
Portfolio Volume
Indicator
Pre-set Value Trigger calculation
formula
Trigger Value
MaxPV* 200 MaxPV*GR*GCR 20
MinPV** 130 MinPV*GR*GCR 13
RPV*** 100 RPV*GR*GCR 10
Guarantee rate
(GR)
50% Guarantee cap rate
(GCR)
20%
* MaxPV ( maximum Portfolio Volume); MinPV (Minimum Portfolio Volume); RPV (Reference Portfolio Volume)
MaxPV trigger
MinPV trigger
RPV trigger GUARAN
-TEE
COVER
Expected Loss Cap amountGuarantee rate
(GR)
50% Guarantee cap rate
(GCR)
20%
GUARAN
-TEE
COVER
0
5
10
15
20
25
30
35
40
45
0
5
10
15
20
25
30
35
40
45

7. Financial Intermediary’s Portfolio of Higher Risk
Transactions to SMEs
COSME LGF’s capped (counter-) guarantee
proposed features
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
 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. 10 year cover of guarantee and min.
12 months maturity of loans
 Retained exposure of the Financial
Intermediary to the SME transactions needs to
be 20% minimum*
COSME LGF capped (Counter-)
Guarantee Structure
* 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
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8. COSME selection process and workflow
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Open Call for
Expression of
Interest
Application
Pre-Selection
Due Diligence
Final Selection
GUARANTEE
AGREEMENT
 Financial Intermediaries established and operating in one of the 28 Member States + Iceland
and Montenegro (further countries still expected until year-end)*can apply to the Open Call
for Expression of Interest to benefit from a COSME LGF product
*COSME is open to candidate, potential candidate and neighborhood policy countries
 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
3to6months
(dependingonqualityofreceivedinformation)
A1 B1 C1
A2 B2 C2
A3 B3 C3
Pre-Selected
On the Reserve List
Not Pre-Selected
QUALITY (A to C)
IMPACT(1to3)
 First-come, first-served - evaluation based on:
 Compliance with formal criteria**
 Quality
 Impact
**Signed declaration of Honour + full Application submitted
 Due diligence meeting
 Requirement of further information if necessary
 Revised Quality and Impact score
If Pre-selected
 Proposal to EIF Board for approval (subject to EC veto right)
 Negotiations and agreement implementation

9.  Financial Intermediaries shall provide:
 quarterly reporting on the portfolio of supported SME transactions; and
 two case studies of supported SMEs
 EIF will publish on its website:
 information (name, address, guarantee amount, etc.) about Financial Intermediaries and Financial
Sub-Intermediaries (in the case of counter-guarantees) unless they provide a written justification
explaining that this publication would harm their commercial interest
 in the case of SME transactions above EUR 150,000 (or EUR 500,000 in securitisation), information
about the SME will also be published unless the SME provides a written justification that such
publication would harm its commercial interest
 Visibility & Promotion:
 SMEs need to be informed by the Financial Intermediary about the EC support through high visibility
(e.g. cover letter, or visible in the contract with the SME in both cases duly acknowledged)
 Promotion from the Financial Intermediary is expected (website, case studies, press release)
Visibility, Publication, Promotion
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10. Contact details
EU Guarantee Facilities Unit
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tel +352 2485 81438
fax +352 2485 51438
e-mail l.amaro@eif.org
EUROPEAN INVESTMENT FUND
Luís Broegas Amaro
Transaction & Relationship Officer
Guarantees & Securitisation
37B, avenue J.F. Kennedy
L-2968 Luxembourg
web www.eif.org
tel +352 2485 81358
fax +352 2485 51438
e-mail g.mai@eif.org
EUROPEAN INVESTMENT FUND
Gunnar Mai
Head of EU Guarantee Facilities
Guarantees & Securitisation
37B, avenue J.F. Kennedy
L-2968 Luxembourg
web www.eif.org