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Operation under the European Guarantee Fund (EGF) aimed to support small and medium-sized enterprises (SMEs) in Germany. The EIB will guarantee the first loss piece (FLP) tranche of a synthetic securitisation of a portfolio of loans and/or leases originated by LBBW. The operation is expected to facilitate the access to finance of SMEs and mitigate the negative economic effects of the COVID-19 pandemic.
EGF guarantee instrument to support new lending to SMEs.
The proposed transaction consists of an EGF operation, in the form of a first loss piece (FLP) guarantee on an existing portfolio of SME and Midcap loans originated by LBBW in order to support new lending to SMEs.
LBBW and its subsidiary SüdLeasing are well-known to the Bank and are experienced promoters in deploying EIB mandates. The quick mobilisation of SME financing is strategic considering their high contribution to the country's growth and employment.
The proposed operation addresses a market failure related to SMEs access to finance in the aftermath of the Covid-19 pandemic. The operation is expected to mitigate the financial constraints for this market segment and help viable companies to sustain their economic recovery and to relaunch their business activity severely hit by the pandemic.
By using an intermediated approach for the new lending, the operation will leverage on LBBW's and SüdLeasing's strong franchise in the market and reach smaller size operations which can usually not be reached. It will scale up of the availability of competitively priced financing with customized conditions beyond the market.
EIB contribution is notable as it offers a guarantee for a subordinated (junior) tranche (novel product in the market). EIB/EIF also leveraged their status as supranational institutions and their AAA rating to provide the guarantee that is acceptable from a regulatory point of view. The EIB participation will have a positive signaling effect to the market and reduce risk perceptions.
Final beneficiaries will be requested to comply with applicable national and EU legislation, as appropriate.
Final beneficiaries will be requested to comply with applicable national and EU legislation, as appropriate.