prop · H703181 · 2020-06-10 00:00:00 — The following variations from the Platform Rules or additional arrangements shall apply in relation to the Fund: In relation to Article 3.1. of the Platform Rules, any of Union shall be an eligible Contributor for purposes of the . In addition, institutions of Union or institutions created by Member States of Union can also make to the Fund. Acknowledging the exceptional nature of the instrument, higher decision-making thresholds than under standard Platform Rules will be applied. Decisions on the use of the guarantee for individual transactions outside the global authorisations will be taken by a qualified majority of contributions, i.e. of contributors representing 2/share of contributions. strategic decisions, including changes in the product or beneficiary mix as set out in sections 3 and 4 of this Fund Description, require a supermajority of contributions, i.e. of contributors representing share of contributions. 12.3 Currency of Contributions and fees All Contributions as well as fees will be paid in EUR. 12.4 process and processes In light of the extraordinary situation, namely the severe limitations, as well as the need for swift channelling of the Fund to the real economy, simplified (namely desk-top) due diligence can be used under certain circumstances. Such circumstances will be clearly spelled out as part of approval process. 12.5 Workouts and restructurings In relation to operations comprising an investment, EIB and EIF are authorised, including in the context of an insolvency or restructuring of an investee, and/or for the purposes of improving the collectability or recovery of any claims against any, and/or to avoid any default by an investee, to amend the terms and conditions of any operation supported by the Fund, and to grant any waiver or forgiveness, even if such amendment, waiver or forgiveness causes a loss to the Fund, provided that EIB or EIF has acted in accordance with its rules, policies and procedures, as applicable. Indirect Operations will envisage full delegation to the Financial Intermediary with respect to servicing of the underlying exposures. The Financial Intermediary will need to act in accordance with its rules, policies and procedures, applicable from time to time. 12.6 Guarantee servicing fee To minimise crowding out and to ensure compliance with EU State Aid Framework, some of the proposed products will be implemented on a remunerated basis. The guarantee servicing fees will be applied and charged to the Financial Intermediaries. 12.7 Risk appetite for The fund will be continuously managed so as to keep ex ante net expected loss on guarantee commitments at for the Fund as a whole. The EIBG will put in place a strong ex ante risk- management system and ensure regular ex post reporting to matters related to risk. is designed to be a high-risk intervention and the underlying operations are expected to present a higher level of risk for the Fund than that generally taken by EIB in relation to operations it out at its own risk. As a result, Article 12.3 (acting in specific circumstances) of the Platform Rules shall apply. to the specific characteristics of the operations to be financed or guaranteed by the Fund, EIB’s rules, policies and procedures applied to operations it out at its own risk shall not be applicable to the operations, including the provisions of EIB’s (“CRGs”), the EIB’s Equity Risk Guidelines (“ERGs”) and the pricing and valuation methodology applicable to operations EIB out at its own risk. EIB shall apply the provisions laid down in the general mandate risk principles for impact finance mandates, included in the relevant section of the CRGs and ERGs. When applying the provisions referred to in this paragraph, EIB shall: (a)Make a Qualitative Assessment (i) in case of Indirect Operations of the suitability of an eligible Financial Intermediary’s risk management framework, systems policies and procedures to implement operations and enter into the relevant sub-operations or the final recipient transactions and (ii) in case of Direct Operations, of the soundness of the investment rationale and plausible business viability of such operations; (b)a pricing of the operations under the Fund using its expert judgement taking into account its Qualitative Assessment and consistent with the Fund’s objectives and, if applicable, after reviewing the pricing of co-financiers taking similar risk to the financial product on the operation, and State Aid rules where applicable. For these financial products, the Contributors and EIB acknowledge that there is no established market for this type of operations. The pricing of the operations under the Fund may be different from the pricing applicable to operations EIB out at its own risk. (c)For Indirect Operations, fully delegate implementation of the transactions, including the pricing of the (sub-)operations to the Financial (Sub-)Intermediaries to apply their own rules, policies and procedures. The Financial (Sub-)Intermediaries may be required to adjust certain terms or their pricing in order to pass on any financial advantage to the final recipients under the transactions. For some products, the Financial (Sub-) Intermediaries shall charge a flat fee to the final recipients. The level of delegation to the Financial (Sub-)Intermediaries to apply their own rules, policies and procedures may exceed the one applicable to operations the EIB out at its own risk. Whereby a “Qualitative Assessment” is defined as “the risk assessment performed by the EIB in accordance with the general mandate risk principles for impact finance mandates included in the relevant section of the CRG or the ERG, and as further described in this article”. An adjusted financial monitoring, restructuring and recovery management from what applicable to operations EIB out at its own risk shall be applicable to the operations under the Fund. In case of Indirect Operations, the financial monitoring, restructuring and recovery management shall be (i)adjusted from what is applicable to operations that EIB out at its own risk; (ii)shall be fully delegated to the Financial (Sub-) Intermediaries to apply their own rules, policies and procedures. For financial products implemented by EIF, EIF will apply its rules, policies and procedures for such financial products which may differ from the rules, policies and procedures applied to operations EIF out for its own operations. The foreign exchange risk arising from any conversion in the context of operations under the Fund shall be borne by the Fund. The Contributors acknowledge and accept (i) the risk of full loss both at the level of the Financial (Sub- ) Intermediaries and of the final recipient, and (ii) a lack of a risk-commensurate return for the operations under the Fund. Agreed upon procedures for specific financial products under the Fund may be developed, further describing EIB’s rules, policies and procedures applicable to the specific type of operations. Given the high risk scope of intervention of the Fund, the EIF will deploy operations under the Fund typically with a higher risk than for its own operations. Agreed upon procedures as well as the risk factors for operations will apply to EIF Operations in the context of the Fund Given the special purpose of EGF as a crisis response instrument, EIB may adapt its usual contractual and eligibility requirements on a ring-fenced basis to allow for operations that address the main symptoms of the current crisis like supply chain support, working capital and liquidity needs. When working with financial intermediaries under full delegation, EIB may also adapt its usual contractual requirements for monitoring, restructuring, reporting, compliance, exclusions and fraud with regards to the final beneficiaries. such adaptation would be clearly spelled out in the approval documents at operation level. 12.9 Negative interest rate risk There will be two main sources of negative interest rate risk in the structure: 1- Negative interest rate risk related to upfront contributions to the Fund: Some of the Contributors may elect to make an upfront contribution to the Fund. In the current negative interest rate environment for EUR, such upfront contributions would reduce over time as a result of negative interest rates. 2- Negative interest rate risk related to recoveries or repayments from the underlying operations. 12.10 Financial, operational and risk reporting As per the financial reporting requirements of the Fund defined under the Contribution Agreement, a cash based financial reporting is prepared and therefore no valuation of the operations of the Fund is foreseen. As foreseen under the Contribution Agreement, upon receipt of the financial reporting documents, the Contributor may request additional information related to the content of the documents. shall use its reasonable efforts to provide the Contributor with the information deemed necessary provided that the relevant information is available to the Bank and subject to having resources to such information. and the Board will receive an annual Operational Report on operations. This operational report will contain a list of every supported signed operation/contract, combined with tables showing signatures per sector, per country and expected Investment Mobilised with the associated financing multiplier. The Contributor’s Committee will receive regular ex-post reporting on matters related to risk. 12.10 EIF policies and procedures In the context of the Fund and in particular, in relation to the assessment, approval, implementation, reporting and exit/termination of operations, EIF will apply its internal rules and procedures, where relevant as modified by the agreed upon procedures applicable to EIF Operations in the context of the Fund, as approved by EIF governing bodies. 12.11 Conflicts of Interest The Contributors acknowledge and agree that EIF and EIB: (i)operate, or may operate, a number of mandates (“the Mandates”) that have or may have investment objectives, strategies and policies which may overlap with the Fund investment objectives, strategies and policies; (ii)may on its own account and/or on behalf of third parties, in the context of the Mandates, invest or recommend to such third parties the making of investments in (x) financial instruments of a similar nature to the or (y) Fund investments in a number of jurisdictions, including jurisdictions where the Fund will operate; (iii)may (x) interact in other capacities with the Fund investments (for example, as an investor for the benefit of another Mandate or under own resource investments) as well as (y) provide guarantees or financing to the same eligible final beneficiaries as the Fund investments contemplated herein, including in a where the Fund may be subordinated to, or serve as a credit enhancement for, such other investment; (iv)may take part in transactions in which EIF or EIB have, for its own account or for that of any of the Mandate, directly or indirectly, a material interest or a relationship of any description with another party, which involves or may involve a potential conflict with any duty it may owe to the relevant ; The Contributors hereby waive any rights or defences which they might otherwise have which arise or may arise from the EIF or EIB acting in any capacity as manager of the mandates or otherwise. Appendix A – : Risk sharing through NPB/FI Appendix B – : Appendix C – : Venture Debt Appendix A – : Risk sharing through NPB/FI PRODUCT INSTRUMENT 1: PORTFOLIO RISK SHARING THROUGH NPB/FI Risk sharing (linked) on non-granular/semi-granular/granular pool of credit exposures. Funded and Unfunded risk sharing (Risk Sharing). In the case of unfunded risk sharing, EIB shall issue a guarantee (the “Guarantee”) for the benefit of a Financial Intermediary (FI), such as a (), for a maximum amount (the “Guarantee Amount”). The Guarantee will cover the credit risk associated with Eligible Transactions contracted with The Guarantee shall constitute a direct financial guarantee and shall cover up to of the losses relating to unpaid principal and accrued interest incurred by the FI in respect of loans that defaulted in accordance with the default definition. The maximum liability in respect of aggregate losses on the guaranteed portfolio shall be the Guarantee Amount. The origination, due diligence, documentation and servicing of the Eligible Transactions shall be fully delegated to and performed by the FI in accordance with its standard origination and servicing procedures, which is not possible under standard operations underlying full EIB Best To facilitate urgent outreach to target beneficiaries, full delegation structures are possible under an Mandate with risk coverage. Funded risk sharing structures (such as contingent loans) may also be carried out on similar Ensure uninterrupted access to finance for SMEs, MidCaps and large corporates (through e.g. supply chain operations6) through the provision of an capped and uncapped guarantee for portfolios of newly originated eligible transactions. It is anticipated that the access to finance supported by this instrument will contribute to Financial or credit institutions duly authorised to carry out lending or leasing activities according to the applicable legislation. Loans and guarantees provided by FI to Final Recipients, including: ∙ term loans for investments, liquidity facilities/ lines, ∙ short-term loans, including Supply . SMEs including micro SMEs and innovative SMEs, Mid-Caps, large corporates or other entities facing difficult access to financing and or liquidity constraints as a result of sudden business 6The supply chain product is in substance a short-term loan to a Borrower (typically a Mid-Cap or large corporate) that works in a triangular relationship as follows : ‐The suppliers (usually SMEs) provide services/goods to the buyer (the Borrower, i.e. the Mid-Cap or large corporate) and issue invoices for the services/goods provided to the buyer. ‐The buyer verifies the validity of the invoices and notifies these invoices to the Financial Intermediary. ‐Invoices confirmed are paid by the Financial Intermediary to the suppliers. ‐The buyer repays the Financial Intermediary for the amounts advanced to the suppliers. , the supply chain product, although extended to Mid-Caps or large corporates, it is effectively a tool to support SMEs. disruption in the context of national and international measure to contain the spread of the COVID 19 virus, in particular those that: ∙ Prior to the COVID-19 outbreak (i.e. before 1 January 2020) were considered as acceptable counterparts for financing and they were not in difficulty as defined in the General In addition, Final Recipients could also include public entities providing essential services in particular in health, research, education sectors that could not be financed under existing EIB Access to finance for companies affected by the economic impact of the COVID-19 pandemic and related measures to contain its spreading, which has resulted in severe economic downturn triggering the escape of the EU fiscal framework. Provision of uniform financing support across all Contributing Member States, to complement the available national and European support mechanisms and preserve a level playing field in the single market. All EU participating Member States. EUR or other EU currencies depending on the targeted area of the project (possibly restricted to currencies in which EIB trades, due to treasury/liquidity reasons). Although still under consideration, the intention is to comply with the maximum tenor requirements included in the Temporary Framework. The Financial Intermediary would need to retain at least [] of the exposure to preserve an alignment of interest with the EGF. ∙ The origination, due diligence, documentation, servicing (including potential enforcement, workout and recovery actions) relating to the underlying portfolio shall be performed by the Financial Intermediary according to its own internal procedures taking into account the applicable EU and national rules, regulations and the applicable industry ∙The financial intermediary shall be able to demonstrate that it operates a mechanism that ensures that the advantages are passed on to the largest extent possible to the final recipients in the form of higher volumes of financing, riskier portfolios, lower collateral requirements, lower guarantee premiums or lower interest rates. Credit risk on the underlying Final Recipients that fulfil the eligibility criteria. Credit risk on the FI with respect to recoveries, fees and clawback amounts. Given the targeted Mandate nature, EIB would benefit from a guarantee Fixed fee in line with State Aid Laws (to the extent applicable). Contributors to the pan-European Guarantee Fund joint and integrated approach to financial instruments/initiatives with NPB and commercial banks will be implemented. The risk sharing product will be deployed under a bespoke State aid regime modelled on the Temporary Framework as agreed with . 7As defined in Article 2(18) of the Commission Regulation (EU) No 651/2014 of 17 2014 declaring certain categories of aid compatible with the internal market (OJ L 187 of 26.6.2014, p. Appendix B – : PRODUCT INSTRUMENT 2: Product family / Guarantees. Under , EIB would purchase/ subscribe/ guarantee a capital market Risk taking with the support of the will be on an existing reference portfolio (or a capital market instrument), but purpose linked to the generation of a new eligible portfolio with agreed parameters and within a defined timeframe. Examples of such structures could include: EIB subscribing to mezzanine or equity tranches of ABS securitisations in the primary market and at market conditions, beyond the rules of the Bank’s risk policy guidelines and the remaining limited capacity under the EFSI (for mezzanine). EIB purchasing a senior non-preferred bond, qualifying for MREL (Minimum Requirement for Liabilities) issued by a Financial Intermediary in the primary market and at market conditions. A turnkey solution aiming at supporting SMEs and Mid-Caps with improved access to finance: ∙ Intermediated-solution: with one single operation, EIB will provide support a large number of Final Recipients; ∙ Fast channelling; ∙ Temporary reduction in as merely a transmission mechanism to achieve the policy objectives. It would facilitate credit capacity, which the Financial Intermediary will be contractually obliged to channel to purpose-related lending. ∙ Improved-lending terms: transfer of the financial advantage, via the Financial Intermediaries, to the eligible beneficiaries. [8x]. Financial or credit institutions. The New Eligible Portfolio that the Financial Intermediary contractually commits to build up must comply with specific eligibility criteria set under the dedicated operational programme, with a focus on Capital Expenditure and Working Capital support post COVID-19 crisis. The Final Recipients of the new contractually set New Eligible Portfolio will include SMEs including micro SMEs and innovative SMEs, Mid-Caps, large corporates or other entities facing difficult access to financing and or liquidity constraints as a result of sudden business disruption in the context of national and international measure to contain the spread of the COVID 19 virus, in particular those that: ∙Prior to the COVID-19 outbreak (i.e. before 1 January 2020), were considered as acceptable counterparts for financing and they were not in difficulty as defined in the General In addition, Final Recipients could also include public entities providing essential services in particular in health, research, education sectors that could not be financed under existing products. 8As defined in Article 2(18) of the Commission Regulation (EU) No 651/2014 of 17 2014 declaring certain categories of aid compatible with the internal market (OJ L 187 of 26.6.2014, p. Access to finance for companies affected by the economic impact of the COVID-19 pandemic and related measures to contain its spreading, which has resulted in severe economic downturn triggering the escape of the EU fiscal framework. financing support across all Contributing Member States, to complement the available national and European support mechanisms and preserve a level playing field in the single All EU participating Member States. EUR or other EU currencies depending on the targeted area of the project (possibly restricted to currencies in which EIB trades, due to treasury/liquidity reasons). In terms of tenor, the expectation is that generally the tenor will follow the Temporary State Aid Framework in terms of tenors. The Financial Intermediary would need to retain minimum levels of the capital structure in line with CRR rules. Depending on the characteristics of the specific instrument. Contributors to the pan-European Guarantee Fund Credit risk on the underlying portfolio and potentially on the Financial Intermediary (in case of funded operations). The pan-European Guarantee Fund may cover high-risk tranches in instruments that would typically be unrated. joint and integrated approach to ABS and financial instruments/initiatives with NPB will be implemented. The is a wide category that would cover a range of products. would be deployed either on market terms or under de minimis regulation or a bespoke State aid regime modelled on the Temporary Framework as agreed with . Appendix C – : Venture Debt PRODUCT INSTRUMENT 3: VENTURE DEBT Equity-type risk financing to innovative and fast-growing SMEs and Mid-Caps structured as debt instrument with upside participation, incl. with buyback option. A solution based on the experience and demand from the existing Venture Debt product under EGFF, supporting the “real economy” and providing SMEs and Mid-Caps with improved access to financing, in particular those affected by the ∙ Direct-solution: EIB will provide a tailor-made support to individual Final Recipients in each operation; ∙ Channelling of the equity-type loans to the Final Recipients, whose growth was affected by the adverse market conditions and lack of funding support from the equity investors due to the crisis. ∙ Although addressing a wide group of companies, focus is on those entering a growth phase before the start of the COVID-19 crisis and investing in ∙ Sector coverage: innovation driven sectors such as life sciences, ICT and innovation, which represent areas where the market gap for equity-type financing is the most pronounced. ∙ Provision of Venture debt extends the scale and scope of the remaining limited risk capacity under EFSI. SMEs and Mid-Caps facing difficult access to financing, in particular those that: ∙ Prior to the COVID-19 outbreak (i.e. before 1 January 2020) were considered as acceptable counterparts for financing and they were not in difficulty as defined in the General . ∙ This includes innovative life science companies at the forefront of COVID-19 related research into solutions such as vaccines, therapeutics or diagnostics and scaling up the productions of these solutions The Final Recipients need to comply with specific eligibility criteria set under the dedicated operational programme, with a focus on innovation, Capital Expenditure and Working Capital support post COVID-19 crisis. Same as EIB counterparts Access to finance for companies affected by the economic impact of the COVID- 19 pandemic and related measures to contain its spreading, which has resulted in severe economic downturn triggering the escape of the EU fiscal Provision of uniform financing support across all Contributing Member States, to complement the available national and European support mechanisms and preserve a level playing field in the single market. All EU Member States. EUR or other EU currencies depending on the targeted area of the project.