Direct RSFF Financing: Mezzanine Financing
Under RSFF, the EIB can provide Mezzanine Financing in the form of subordinated debt.
Mezzanine Financing combines features of equity financing (e.g. subordinated ranking versus senior debt, participation in value gains of the company/project, strong information/control rights of the lender) with classical debt features (e.g. senior ranking versus equity, obligation to repay the principle, tax-deductibility of interest payments).
Mezzanine financing typically strengthens the borrower’s economic capital without diluting existing shareholders’ rights and generally improves the borrower’s credit rating.
General terms and conditions of EIB mezzanine loans/guarantees:
- Lending term of 5-6 years
- Repayment at maturity, in full
- Interest payments include a cash premium at maturity, in order to compensate for higher risks assumed by the lender
- Depending on the overall structure, EIB Mezzanine Financing can be made available in the form of a subordinated loan or guarantee
- Maximum loan amount: up to 50% of eligible project cost
- Minimum loan amount: EUR 7.5m (smaller loans will preferably be handled through the Risk Sharing Instrument)
- Due diligence focuses on financial, technical, market & legal risks. EIB usually relies on own resources for due diligence projects
- The loan approval process usually takes 6 months
- Loan pricing: commensurate to the level of risk assumed by the Bank, depending on the borrower’s financial standing and contractual terms and conditions agreed
- Fees: in accordance with the complexity of the transaction
Example of a project eligible for RSFF Mezzanine Financing:
A highly leveraged RDI intensive company in a turn-around situation is seeking to optimise its balance-sheet through a quasi-equity financing instrument. As a result, the holdings of the existing shareholders will not be diluted.
Other RSFF Financing Products: