Competitiveness & Growth
As the pandemic’s economic fallout has been followed by strong inflationary pressures, supply chain disruptions, the war in Ukraine and the subsequent energy crisis, we have worked closely with our partners and financial intermediaries on the ground to make sure that small businesses across the European continent are able to access the financing they need to overcome the challenges they are facing and keep their entrepreneurial projects on track.
In the course of 2022, investments in the growth and competitiveness of European businesses has constituted a major part of our efforts, representing around 43% of our activity in the form of mobilised investments.
We completed the delivery of the EGF and flanked it with further recovery efforts at both European and national level, including through tailored instruments at the local level.
In addition, we channelled growth finance in the direction of ambitious start-ups to make sure they are able to take the next step and scale their business despite the multitude of challenges they are facing.
Driving the recovery
The European Guarantee Fund was activated in 2021 in order to provide sufficient short-term liquidity for companies in participating Member States to weather the financial storm and continue along their growth trajectory. 2022 saw the last series of transactions, mainly in the area of securitisation and equity.
In Bulgaria, we signed a guarantee on a synthetic securitisation of SME and mid-cap loans originated by UniCredit Bulbank. This transaction is expected to provide more than €630m to Bulgarian SMEs suffering from the economic consequences of the pandemic and exposed to instability due to events in Ukraine. It is the first EIB Group synthetic securitisation in Bulgaria and the first securitisation with a UniCredit subsidiary in Central and Eastern Europe.
In Italy, we concluded with Banca Popolare di Sondrio (BPS), a synthetic securitisation operation on a portfolio of loans granted by BPS to corporate counterparties with a value of around €1bn. The operation enables BPS to cover working capital and fund investment needs of more than 2000 SMEs through low-interest loans.
Working with EIF shareholder UniCredit Group, three synthetic securitisation operations were concluded in Germany, Italy and Bulgaria that will mobilise a total of €5.6bn to support small businesses with their investment and working capital needs in the three countries.
We also concluded our first diversified debt fund investment in Ireland, providing flexible financing to Irish SMEs and entrepreneurs through a €70m investment in SME-focused direct lending fund Oak Corporate Credit DAC. The deal offers tailored and flexible debt capital solutions to lower mid-market companies across a diverse range of sectors, to help finance the scaling of their activities through investment and development expenditure, acquisitions, recapitalisations or to resolve legacy financing issues. This investment will contribute to supporting the economic recovery of Irish companies and drive growth, innovation and employment in Ireland.
In Poland we have joined forces with Bank Millennium to support working capital and liquidity needs, as well as to cover the investment constraints of Polish SMEs affected by the COVID-19 crisis. The guarantee provided by the EIB Group will generate new financing worth approximately PLN 4.2bn (€882bn) for Polish SMEs via a synthetic securitisation of a portfolio of SME loans. Apart from addressing working capital and liquidity needs, and the investment constraints that SMEs are facing the aftermath of the pandemic, the transaction will also help to further develop the securitisation and risk-sharing initiatives in Poland.
From recovery to resilience & competitiveness
Recovery efforts do not end with EGF however, and the EIF is continuing to extend support to financial intermediaries across Europe, responding to strong demand for both our debt and equity products.
In Greece, the EIF has been entrusted with the management of €400m of RRF investments to help Greek SMEs. The new support, which represents one of the first contributions to the InvestEU Member State compartment in Europe, is designed to help Greek SMEs obtain access to finance on favourable terms while incentivising investments in climate action and digital transition projects. Under this new mandate, the EIF will be extending support for investments in energy efficiency and renewable energy, investments boosting the competitiveness and growth of local enterprises, access to finance of research & innovation-intensive Greek businesses, and the uptake of digital technologies.
Beyond the RRF, other instruments have also been used to deliver much-needed financial support to small businesses.
In Malta, we renewed our partnership with Bank of Valletta. This new agreement will allow Bank of Valletta to provide an additional €28 million to Maltese SMEs on favourable terms and with long tenors over the next two years, to help them overcome the economic crisis caused by the COVID-19 pandemic. The favourable conditions on the loans are achieved thanks to a structured finance project defined as “risk transfer”, implemented by combining funds managed at the national level with resources from the EU programme and EIB Group resources. This agreement is created in the form of an uncapped guarantee operation on a portfolio of new loans to be originated by the Bank of Valletta, using these funds to cover the first losses of the portfolio.
In the Baltics we signed a synthetic securitisation agreement to support at least €460m in new lending for AS Citadele banka that will help expand lending to local businesses in the region. The deal which combines EIF’s investment and structuring expertise, will provide much needed capital relief for SMEs. The transaction demonstrates EIF’s commitment to provide synthetic securitisation as an asset class to deliver capital relief in jurisdictions that traditionally have not enjoyed a strong presence in securitisation markets.
In France, together with the Bourgogne Franche-Comté region, we have set up a €50m holding fund. This is the first such initiative using ESIF resources in the new programming period and will contribute towards European competitiveness by promoting innovation, smart economic transformation and regional ICT connectivity through the deployment of two financial instruments, namely a guarantee instrument aiming to leverage 8x the invested amount, and an equity instrument targeting SMEs with a high growth potential. In addition, Region Occitanie entrusted the EIF with the implementation of a €100m holding fund to respond to market needs, helping small businesses with their recovery and digitalisation efforts, competitiveness and growth ambitions.
Of those start-ups that manage to launch and develop a product successfully, about 80% fail to see it through to full scale-up – McKinsey
Growth finance
An area of particular focus has been growth finance, that is tailored to ensure that young businesses in need of financing to realise their ambitions are able to secure it, be it through equity or debt instruments. Particularly with the inflationary pressures, supply chain disruptions and the energy crisis all weighing down on ambitious start-ups, we have made every effort to make sure that, through our partners, financing is available when the time comes to take that all-important next step in a business’ development.
Long term financing through the traditional banking system is increasingly hard to obtain, particularly for lower-mid market companies who struggle to fund their growth. To fill this gap and market demand we have backed teams that provide flexible alternatives.
In Portugal, we invested €25m into Oxy Capital III, a fund managed by a seasoned and experienced team with a flexible approach to investment, combining equity, debt and hybrid instruments. The fund focusses on high-growth, export-oriented SMEs and small mid-caps helping them to compete on the international stage.
In Central and Eastern Europe (CEE region), we participated in the development of underserved market segments, committing €40m to AMC V, a hybrid debt-equity fund. AMC, which is managed by one of the most experienced teams in this sphere in the region, provides flexible financial solutions, mainly in the form of subordinated debt with structured equity upside, to lower mid-market companies with the aim of financing their growth projects.
Finally, we invested €40m, in Innova/7, a private equity fund focusing on the growth and scaling of lower to mid-market companies in Poland and across the CEE region that are active in sectors including business services, financial sector, consumer products and services, manufacturing, healthcare and retail. With this transaction we are helping the development of private equity market in CEE and backing one of the few private equity players active in the small mid-cap and mid-cap segments in the region.
“Growth is vital for European companies’ survival in the long term. It is key for them to remain competitive while maintaining and creating new jobs. In the current climate, we need more fire power, financing opportunities and creative solutions to make this possible for them.”
Sarah Stein EIF
Juvinum: weathering the storm
Location
Stockholm, Sweden
Financial Intermediary
DBT
SME
Juvinum Food & Beverage AB
Sector
wholesale; food
Number of employees
4
Financing purpose
cashflow
EU financing
EGF
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