EIB grants € 95 million guarantee to LBBW to support SMEs affected by COVID
The European Investment Bank (EIB) group has granted a guarantee of 95 million euros to Landesbank Baden Württemberg (LBBW). The guarantee will provide a release of capital to LBBW and allow Germany’s largest Landesbank to provide new loans of up to € 570 million to small and medium-sized businesses. The transaction is expected to help small businesses recover from cash shortages caused by the COVID-19 crisis. The EIB expects the overall loan to increase to € 800 million through the engagement of additional lenders, and the transaction is expected to support 28,000 jobs.
The operation is supported by the European Fund for Strategic Investments (EFSI). The EFSI is the central pillar of the Investment Plan for Europe, in which the EIB Group and the European Commission are strategic partners to mobilize investments in the European economy. The EIB Group is made up of the European Investment Bank (EIB) and the European Investment Fund (EIF), which provide loans to small businesses on favorable terms.
The EIF will issue a € 95 million guarantee to LBBW covering a mezzanine tranche of a € 1.8 billion loan portfolio in a synthetic securitization structure. A (back to back) EIB counter-guarantee will fully reflect the EIF’s obligation for the EIB to assume the mezzanine risk with LBBW.
“Due to COVID-19, many companies are experiencing a drop in demand for their goods and services, many of them are even struggling to stay in business,” said EIB Vice-President Ambroise Fayolle , responsible for operations in Germany and EFSI. “Transactions like this with LBBW are crucial in making financing available to these companies. They are helping companies get through the crisis and secure tens of thousands of jobs. I am happy that we can count on LBBW as a trusted partner to provide the financial means. which German companies need so badly in these difficult times. “
Alain Godard, Director General of the EIF, added: “The EIF is delighted to work 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 efficient deployment of EFSI funds provides a competitive financing solution for LBBW that will serve to boost the supply of finance in the real economy. In these difficult times, it is important that we work with trusted partners to generate much needed support for European businesses.
European Commissioner for the Economy, Paolo Gentiloni, said: “I welcome this support to German small and medium-sized enterprises through the Landesbank Baden Württemberg, which is backed by a guarantee from the EIB Group and the Plan d investment for Europe. Through this agreement, companies will have additional access to finance to maintain their operations and preserve jobs. We will continue to firmly support businesses in these difficult times. “
Karl Manfred Lochner, member of the LBBW Management Board in charge of corporate banking, said: “For LBBW, the top priority is to support its clients in this crisis and at the same time to reliably support them in their transformation. . It is particularly difficult for SMEs to invest enough in research and innovation in the current situation. “
“Therefore, we are delighted to be one of the first German banks to take this opportunity with the EIB in the current crisis to offer our clients low cost financing,” added Jürgen Harengel, Managing Director of the corporate bank.
Dr Christian Ricken, Board Member responsible for Capital Markets at LBBW, said: “The transaction is a prime example of how capital market instruments can be intelligently used to create additional funding opportunities. for SMEs.
“Capital market solutions can add value to SMEs in many other areas as well. We therefore intend to further develop our activities in a targeted manner, ”added Christian Sagerer, Head of Financial Institutions & Corporates at LBBW.