Locations- LBBW will provide loans of up to €960 million on favourable terms to small businesses (SMEs) in Germany.
- The synthetic securitisation transaction between the EIB, EIF and LBBW aims to assist SMEs with their recovery from the negative impact of the coronavirus pandemic and inflation.
- The junior tranche in the transaction is backed by the European Guarantee Fund (EGF), part of the European Union’s €540 billion COVID-19 response package.
The European Investment Bank (EIB) Group has provided a junior tranche guarantee of €160 million to Landesbank Baden-Württemberg (LBBW) in a synthetic securitisation operation. The transaction will release capital for LBBW and enable Germany’s biggest provincial bank (Landesbank) to provide new lending of €960 million to small businesses (SMEs). The transaction is expected to help these businesses to recover from pandemic-induced liquidity shortages.
The EIB expects the addition of further lenders to expand the overall lending to €1.34 billion, supporting 24 000 jobs.
The transaction is supported by the European Guarantee Fund (EGF). The EGF has been designed to be a high-risk, high-impact intervention of limited time. Its goal is to respond to the economic impact of the coronavirus pandemic by ensuring that eligible entities and primarily SMEs in the participating EU Member States have sufficient liquidity available. While the most prominent economic symptoms of the COVID-19 crisis are fading, the economic risks, in particular in light of currently rising commodity prices and inflation, continue to prevail. Improved access to finance helps companies to weather the crisis in the medium and long term.
The EIB Group consists of the EIB and the European Investment Fund (EIF), which provides smaller companies with loans under favourable conditions. The new guarantee will be provided by the EIF to LBBW. A (back-to-back) counter guarantee from the EIB will fully mirror the EIF’s obligation, so that the EIB takes on the junior risk with LBBW.
EIB Vice-President Ambroise Fayolle, who is responsible for operations in Germany, said: “Transactions like this one with LBBW are crucial to making financing for SMEs available. They help companies to weather the crisis and secure tens of thousands of jobs. I am glad that we can rely on LBBW as a trusted partner to provide the financial means so badly needed by businesses in Germany in these challenging times.”
EIF Chief Executive Alain Godard added: “The EIF is pleased to be working with LBBW and the EIB to provide additional access to finance for SMEs and mid-caps. The combination of the EIF’s investment and structuring expertise and the EIB’s efficient deployment of EGF funds offers a competitive financing solution for LBBW that will serve to boost the supply of finance in the real economy. In these trying times, it is important that we work together with trusted partners to generate much-needed support for European businesses.”
Member of the Executive Management Board of LBBW Christian Sagerer said: “Serving the European economy by actively supporting corporates as a trustworthy and reliable partner is part of LBBW’s DNA. Thanks to our partners the EIB and EIF and our second joint transaction, we are able to further support the European economy and especially German small and medium-sized corporates with additional liquidity.”
