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%

1

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

21

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

16

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

34 34 3434