The European Investment Fund has agreed to guarantee the junior tranche of a portfolio of small and medium-sized business loans held by Rabobank as part of a deal to stimulate more lending help with economic recovery after the Covid-19 pandemic.
In addition, the European Guarantee Fund will counter-guarantee the first loss piece of the credit risk sharing transaction, which qualifies as a simple, transparent and standardised securitisation and will free up capital for Rabobank. The Dutch lender has committed to lend a further €445m to SMEs as part of the bargain.
Georgi Stoev, head of Northern European and CEE securitisation at the EIF, said it could be the institution’s last announcement of a junior investment in a synthetic securitisation backed by Dutch SME loans in a post on LinkedIn.
“The whole bunch of such risky investments were only made possible due to the quick reaction of the EU and the consequent establishment of the pan-European guarantee fund (EGF) which had a significant (fiscal) impact in the fight against the covid-19 induced economic slowdown,” he wrote.
The EIF is a subsidiary of the European Investment Bank, which has also announced the signing of a €300m loan to Rabobank to fund so-called impact loans, which are available to entrepreneurs and small businesses that hold a sustainability label. Rabobank will match the €300m from the EIF, bringing the total impact loan amount to €600m.