Innovative financing to support french SMEs and midcaps

The EIB Group – composed of the European Investment Bank (EIB) and its subsidiary the European Investment Fund (EIF) – and the BNP Paribas Group have decided to step up their support for European companies, providing over €1 billion in new financing.

Among the newly-signed agreements is one especially innovative partnership: the first-ever synthetic securitisation deal in the context of the ‘Juncker Plan’ on a portfolio of loans granted to French small or medium-sized enterprises (SMEs) and midcap firms. The two financial groups have also signed the second partnership for the purpose of financing the ‘greening’ of the shipping sector in France. These financing operations come under the Investment Plan for Europe, otherwise known as the ‘Juncker Plan’.

“We are delighted to further strengthen our partnership with the BNP Paribas Group through these innovative, pioneering financing operations. The Juncker Plan has enabled us to arrange the very first guarantees in France linked to the synthetic securitisation of portfolios of existing loans to French companies,” declared EIB Vice-President Ambroise Fayolle at the signing ceremony, underlining: “By structuring higher-risk loans and lending to sectors that are new for us, such as shipping, in this way, the European Union bank is stepping up the financing it provides to business enterprises, thus facilitating their overall access to finance and helping them to pursue growth strategies. The aim is to support sustainable growth with suitable, powerful and attractive tools in order to help to attain the priorities set out in the French government’s announced major Investment Plan and meet the commitments made at COP21.”

As a major international bank, we have a key role to play in supporting the European economy, especially growth and employment in France. We’re committed to continuing to finance SMEs and midcaps all over Europe and this forward-looking partnership with the EIB Group is a perfect illustration of our common goals. The three innovative deals that we’re proud to have concluded with the EIB Group will help promote sustainable growth in European Union countries.

Alain Papiasse, BNP Paribas Group Deputy Chief Operating Officer

A pioneering financing operation in France

BNP Paribas, together with the European Investment Bank (EIB) and the European Investment Fund (EIF), which make up the EIB Group, announced the signing of the very first synthetic securitisation deal on a portfolio of loans granted to French SMEs and midcap firms in the context of the ‘Juncker Plan’. The signing took place on Monday 18 December 2017. The agreement provides for the risk sharing between the EIB and BNP Paribas, while the assets will remain on the BNP Paribas balance sheet. As a European financial institution with recognised expertise in synthetic securitisation operations, the EIF has been mandated to negotiate the structuring of the deal. 

This highly innovative operation enables BNP Paribas to free up part of the regulatory capital allocated to a portfolio of SME and midcap loans. Once the capital has been liberated through the arranged loan guarantee, further loans can then be made available to support investment projects by French SMEs (companies with fewer than 250 employees) and midcaps (those with fewer than 3,000 employees). The beneficiaries of these loans will be able to obtain highly favourable borrowing terms, with a 25-basis-point reduction in the interest rate due to the agreed asset retrocession to BNP Paribas by the EIB. The financing provided may take the form of a bank loan or a financial leasing arrangement.

A total envelope of €420 million is being made available and will be allocated over the next two years.

The financial engineering undertaken for this deal is a ‘first’ in the market, which may serve as an example to other European banks and enable them to channel the regulatory capital thus saved into new loans to SMEs and midcap firms.

This innovative initiative is complemented by a €200 million line of credit provided to BNP Paribas by the EIB, which will enable the Group to support further capital investment projects by French SMEs and midcaps by granting loans at favourable rates.

With this cooperative initiative under the Juncker Plan, the EIB Group and BNP Paribas are ratchetting up their support for French SMEs and midcaps in a wide variety of sectors.

An innovative partnership designed to promote a ‘greener’ maritime sector

Meanwhile the EIB and BNP Paribas have signed a framework agreement on financing worth €150 million earmarked to support naval construction and the modernisation of existing vessels with a view to making maritime transport more sustainable and environmentally-friendly, in line with the targets set at the 2015 Conference of the Parties to the UN Framework Convention on Climate Change (COP21). The EIB’s involvement allows the sharing of the risks inherent in financing arrangements of this type, designed to enable French or other European shipping companies to undertake projects to ‘green’ their fleets. This financing initiative, which also comes under the Connecting Europe Facility (CEF), is the second such agreement in France signed by the EIB.

The Juncker Plan is steadily gaining momentum in France, with 111 deals worth a total of €8.7 billion signed to date, enabling the deployment of an additional €40 billion worth of investments.

Supporting Polish SMEs and midcaps

BGZ BNP Paribas S.A. and the European Investment Bank announced on 18 December 2017 a new PNL 1 billion (circa €240 million) financing deal, designed to boost the support available to Polish SMEs and midcap companies, which will benefit from a reduced interest rate, thanks to the involvement of the EIB under the Juncker Plan. This is a securitisation deal on an existing PNL 2.3 billion (circa €545 million) portfolio of consumer loans, for which the EIF provided its structured finance knowhow.