The guarantee will provide capital release for LBBW and enable Germany’s biggest Landesbank to provide new lending of up to €570 million to small and medium-sized companies.
The transaction is expected to support smaller businesses in their recovery from liquidity shortages caused by the COVID-19 crisis. The EIB expects the overall lending to expand to €800 million via the engagement of additional lenders, and the transaction is expected to support 28 000 jobs.
The transaction benefits from the support of the European Fund for Strategic Investments (EFSI). EFSI is the central pillar of the Investment Plan for Europe, in which the EIB Group and the European Commission are strategic partners to mobilise investments in the European economy.
The EIB Group consists of the European Investment Bank (EIB) together with the European Investment Fund (EIF), which provides smaller companies with loans under favourable conditions.
The EIF will issue a €95 million guarantee to LBBW covering a mezzanine tranche of a €1.8 billion loan portfolio in a synthetic securitisation structure. A counter guarantee (back to back) from the EIB will fully mirror the EIF’s obligation, so that the EIB takes on the mezzanine risk with LBBW.
“Due to COVID-19, many companies are experiencing a slump in demand for their goods and services, a lot of them are even struggling to stay in business,” said EIB Vice-President Ambroise Fayolle, who is responsible for operations in Germany and EFSI. “Transactions like this one with LBBW are crucial to making financing for these companies 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 EFSI 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.”
European Commissioner for the Economy, Paolo Gentiloni, said: “I welcome this support for small and medium-sized German businesses through the Landesbank Baden Württemberg, which is backed by a guarantee from the EIB Group and the Investment Plan for Europe. Thanks to this agreement, companies will have additional access to finance to maintain their operations and safeguard jobs. We will continue to show strong support for businesses in these difficult times.”
Karl Manfred Lochner, the member of LBBW’s Board of Managing Directors responsible for corporate banking, said: “For LBBW, the top priority is to support its customers in this crisis and at the same time reliably assist them in their transformation. It is particularly difficult for SMEs to invest sufficiently in research and innovation in the current situation.”
“Therefore, we are pleased to be one of the first German banks to take advantage of this opportunity with the EIB in the current crisis to provide our customers with discounted financing,” added Jürgen Harengel, Managing Director of corporate banking.
Dr Christian Ricken, Member of the Board of Managing Directors responsible for the capital markets at LBBW, said: “The transaction is an excellent example of how capital market instruments can be cleverly used to create additional financing opportunities for SMEs.”
“Capital market solutions can also add value for SMEs in many other areas. We therefore intend to further expand our activities in a focused manner”, added Christian Sagerer, Head of the Financial Institutions & Corporates division at LBBW. ■
A clipper system will move quickly across the northern Plains into the Midwest Friday and the Northeast by Saturday, bringing a wintry mix of rain and snow showers ahead of a sweeping cold front.