EN
16.6.2022
(b)
Official Journal of the European Union
L 161/109
Funded debt instruments: loans
114.
A risk finance measure may cover the provision of loans at the level of either the financial intermediaries or the final beneficiaries.
115.
Funded debt instruments may take different forms, including subordinated loans and portfolio risk-sharing loans.
Subordinated loans may be granted to financial intermediaries to strengthen their capital structure, with a view to providing additional financing to eligible undertakings.
Portfolio risk-sharing loans are designed to provide loans to financial intermediaries who commit to co-finance a portfolio of new loans or leases to eligible undertakings up to a certain co-financing rate in combination with credit risk-sharing of the portfolio on a loan-by-loan (or lease-by-lease) basis.
In both cases, the financial intermediary acts as a co-investor in the eligible undertakings but enjoys preferential treatment compared to the public investor or lender as the instrument mitigates its own exposure to credit risks resulting from the underlying loan portfolio.
116.
In general, where the risk mitigation characteristics of the instrument lead the public investor or lender to assume, with respect to the underlying loan portfolio, a first loss position exceeding the cap set out by the General Block Exemption Regulation, the measure may only be justified in case of measures targeting exclusively start-ups and SMEs before their first commercial sale or at the proof-of-concept stage or in the event of a severe market failure or other relevant obstacle which must be clearly identified in the ex ante assessment.
The Commission will consider positively measures which provide for an explicit cap on the first losses assumed by the public investor, notably where such a cap does not exceed 35 %.
117.
Portfolio risk sharing loan instruments should ensure a substantial co-investment rate by the selected financial intermediary.
This is presumed to be the case if that rate is not lower than 30 % of the value of the underlying loan portfolio.
(c)
Unfunded debt instruments: guarantees
118.
A risk finance measure may cover the provision of guarantees or counter-guarantees to the financial intermediaries, or guarantees to the final beneficiaries, or a combination of the two.
Eligible transactions covered by the guarantee must be newly originated eligible risk finance loan transactions, including lease instruments, as well as quasi-equity investment instruments, but not equity instruments.
119.
Guarantees should be provided on a portfolio basis.
Financial intermediaries may select the transactions they wish to include in the portfolio covered by the guarantee, so long as the included transactions meet the eligibility criteria as defined by the risk finance measure.
Guarantees should be offered at a rate ensuring an appropriate level of risk and reward sharing with the financial intermediaries.
In particular, in duly justified cases and subject to the results of the ex ante assessment, the guarantee rate may be higher than the maximum rate provided for in Article 21 of the General Block Exemption Regulation, but must not exceed 90 %.
This could be the case for guarantees on loans or quasi-equity investments in start-ups or in SMEs before their first commercial sale or at the proof-of-concept stage.
120.
In the case of capped guarantees, the cap rate should, in principle, only cover the expected losses.
Should it also cover the unexpected losses, the latter should be priced at a level that reflects the additional risk coverage.
In general, the cap rate should not exceed 35 %.
Uncapped guarantees (guarantees with a guarantee rate, but with no cap rate) may be provided in duly justified cases and be priced to reflect the additional risk coverage provided by the guarantee.
121.
The duration of the guarantee should be limited in time, normally up to a maximum of ten years, without prejudice to the maturity of individual debt instruments covered by the guarantee, which can be longer.
The guarantee must be reduced if the financial intermediary does not include a minimum amount of investment in the portfolio during a specific period.
Commitment fees must be required for unused amounts.
Methods such as the use of commitment fees, trigger events or milestones can be used in order to incentivise the intermediaries to achieve the agreed volumes.