FINANCIAL PROVISIONS (COVID-19) ACT 2020

c.Venture and growth capital (through the EIF) and venture debt with SMEs and mid-caps as final beneficiaries will account for a maximum of 7% of EGF-supported financing.

Specifically for operations supporting large corporates with more than 3000 employees as final beneficiaries, the following safeguards will apply:

ii) No ABS operations

iii) Support available only for working capital and supply chain finance.

iv) Financing only available through Financial Intermediaries with ‘skin in the game’

vi) Only loans in alignment with Communication from the European Commission regarding the temporary framework for State Aid measures to support the economy in the Covid-19 outbreak, as amended or replaced from time to time, including regarding short loan maturities, in order to rule out strategic investment projects that could be interpreted as ‘industrial policy’.

vii) Only for sectors that are in line with EIB long-term mission (innovation, environment, and SMEs support).

viii) Further involve the Member States represented in the Contributors Committee on individual transactions, complemented with higher reporting requirements.

Without prejudice to 12.4 below, all operations shall undergo an ex-ante due diligence or equivalent process performed in accordance with EIB’s and EIF’s rules, policies and procedures, as applicable.

Geographical Eligibility:

Operations with FI (and final recipients) may be carried out in participating Member States, that is, Member States that have entered into Contribution Agreements with the EIB in relation to the Fund. The contributions of any given Member State will be available for operations in all participating Member States, i.e. contributions will not be earmarked to support the operations in a given Member State. Instead, deployment will be determined based on the need and demand relative to the impact of COVID-19 and the related market situation.

EIB Group will make available additional financing in the context of the Fund in all contributing Member States, aiming for a geographic distribution that is proportionate to the economic impact of the crisis, the sizes of the economies and available national and European support instruments.

By the end of the EGF signature period, EIB Group will aim that its financing[^6]:

• (i) for the three Member States having received the most financing understood as the support by the Fund, the cumulative financing (measured by signature amounts) does not exceed 50% share of the total Fund’s financing

• (ii) for the 15 Member States having received the least financing understood as the support by the Fund, the cumulative financing (measured by signature amounts) exceeds 10% share of the total Fund’s financing

• (iii) underlying financing structures that are by their nature multi-country (covering two or more Member States) are not included in the above rule (i).

The concentration limit shall be periodically reviewed and may be adjusted to reflect the evolving impact of the crisis and market needs in the different Member States. Any change of the concentration limit would be subject to approval by the Contributors Committee.

For indirect products where the Fund’s investment will be combined with third-party resources, Financial Intermediaries will be required to invest at least the portion of their instrument provided for investment by the Fund in participating Member States⁷.

Investment Period:

Operations may be submitted for approval to the Contributors Committee until 31 December 2021 (the “Investment Period”). The Fund will be established, provided that Member States accounting for at least 60% of EIB capital have made appropriate commitments to ensure sufficient scale and geographical coverage of the Fund.

The EIB on account of the Fund and the EIF in the context of the Fund shall sign operations within the timescales foreseen by State aid rules applicable to the specific product concerned.

A prolongation by 6 months could take place subject to approval of the Contributors’ Committee in accordance with the voting rules set out for key strategic changes in 12.2 below⁸. Any further prolongation would be subject to unanimous approval within the Contributors Committee”.

At the end of the Investment Period, following a proposal from EIB, the Contributors’ Committee shall determine whether a reduction in the outstanding commitment of the Contributors is appropriate given the overall commitments at that time.

4. Permitted Instruments

The Fund may deploy financial structures in both funded (e.g. loans, equity and quasi-equity investments, risk participations, ABS purchases) and unfunded (e.g. guarantees) form.

Appendixes A - E (Eligible Products) provide examples of the products that may be used under the Fund indicating the products to be deployed by EIB and EIF respectively.

Additional products could be included subject to the approval of EIB’s Governing Bodies or respectively EIF’s Governing Bodies, including under applicable rules of delegation, and the approval of the Contributors’ Committee of the Fund in accordance with the voting rules set out in the Platform Rules or herein established.

5. Results Framework

A results framework for the activities financed by the Fund shall be prepared by EIB (“Results Framework”). EIB shall report on the results of the Fund in accordance with the reporting framework described in Article 9. 4 of the Platform Rules, except 9.4.1. (iv) as the financial reporting will not follow Platform Rules and shall instead be governed by the Contribution Agreement.

For the avoidance of doubt, article 2. 2 of the Platform rules does not apply to operations deployed by the EIF in the context of the Fund under the EIB/EIF Arrangement (“EIF Operations”), for which a separate reporting methodology will apply. Article 9.4 of the Platform Rules apply to EIF Operations except as further specified in the EIB/EIF Arrangement Agreement.

6. Evaluation

EIB shall perform an evaluation of the Fund after the second anniversary of the end of its Investment Period. This evaluation will aim at making the Fund and the operations funded thereunder accountable to the Contributors and at promoting lessons learnt. The evaluation shall be shared with the Contributors’ Committee.

7. Approval of operations

All operations/ financing proposals are presented to the Contributors’ Committee of the Guarantee Fund.

It is foreseen that the Contributors’ Committee shall approve the allocation of funds:

• (a) For individual operations;

• (b) For multiple operations, based on global authorisations to be granted by the Contributors’ Committee within certain parameters.

• (c) For operations that do not fall within the envisaged global authorisations.

In relation to the Article 5.5. of the Platform Rules, each Contributor to the Fund is entitled to designate a member that shall represent such Contributor in the Contributors Committee. The governance provisions regarding the approval of operations are set out in Section 12.2 below.

A procedure for consultation of the Commission will be applied for operations deployed by EIB, adjusted to the specific nature of the Fund. Accelerated selection and assessment procedures for existing financial intermediaries may also apply.

8. Payment of Contributions

The payment of Contributions is governed by the Platform Rules and the terms of each Contribution Agreement.

Contributions of Member States to the Fund will take the form of a guarantee. Member States may elect to make an Upfront Payment. In addition, EIB expects to provide a suitable level of liquidity into the structure to allow for timely payments of amounts due by Member States.

9. Fees

The Contributors agree that the advances made available to the Contributors under their liquidity facility will be debited immediately to their respective Dedicated Register, the principal amount of such advances are re-payable on their relevant Advance Repayment Date (as indicated in the Contribution Agreement) and cannot be covered by utilisation of the liquidity facility and principal repayment of such advances are not included in the waterfall set out in article 10 below.

The Contributors agree as well that: costs, and expenses incurred by EIB and EIF and relevant fees due to EIB and EIF, as detailed below, are payable by the Contributors and shall be paid in the following order: first, from any Proceeds and Recoveries in line with the waterfall included in article 10 below; and, second, if and to the extent that the Proceeds and Recoveries are not sufficient, any shortfall relating to: (i) interest accrued on the liquidity facilities made available by EIB to the Contributors, (ii) Legal, Auditors and similar Costs, (iii) FX hedging costs, (iv) negative interest on the Contributor Cash Balance and on cash disbursed by EIB and EIF, and (v) EIB Funding Costs, will be covered pro rata by the Contributors, in accordance with the indemnity provisions under the Contribution Agreement and within the limit of the Contribution of each Contributor and in aggregate the Total Contributions and according to the following principles:

• (i) interest accrued on the liquidity facility made available from EIB to the Contributors: will be covered pro-rata by the Contributors who benefitted from the liquidity facility;

• (ii) negative interest on the Contributor Cash Balance; will be covered pro-rata by the Contributors who made an Upfront Payment or an additional cash contribution;

• (iii) Legal, Auditors and similar Costs, FX hedging costs, negative interest on cash disbursed by EIB and EIF and EIB Funding Costs: will be covered pro-rata by all Contributors;

• (iv) No draw down under the liquidity facility will be allowed to cover the items set out above

To operationally manage this, a portion of the total commitments will initially be reserved as a buffer to cover costs and expenses

No recourse to the liquidity facility or the indemnity provisions under the Contribution Agreement will be allowed for Management Fees, and Recovery Fees, hence EIB has no recourse to the Contributors to cover shortfalls of Management Fees and Recovery Fees. Also, if any portion of Management Fees, and Recovery Fees remains unpaid under the waterfall when allocated at the end of each quarter, such unpaid amounts will roll over to the next quarter (and so forth) and will be due and payable in the following quarter (and so forth), following the same order of payment.

Costs and Fees to be paid by the Contributors in accordance with the general principles above and the waterfall below

Funding Costs:

Funding Cost shall comprise interest determined at the rate of: (i) EURIBOR 3 month for operations in EUR, or X-ibor 3 month for other operations, plus (ii) a spread (which can be a positive or negative number of basis points) calculated following EIB's standard pricing methodology recovering EIB's cost of funding on the capital markets and its administrative costs applicable to this type of operations; with (i) and (ii) in aggregate floored at zero.

Management Fee: means from the signature date of the first Contribution Agreement until 31 December 2037, the annual management fee which shall be paid by the Fund to the EIB and EIF (“Management Fee”) and shall be equal to up to 0. 5 (up to zero point five) % of the aggregate of the Committed Amounts under the Transactions subject to an overall aggregate cap of two point five (2. 5) % of Total Contributions.

Committed Amounts mean the aggregate of the amounts committed by EIB or EIF in relation to operations signed by EIB or EIF for the account of the Fund which are outstanding (but excluding any outstanding defaulted amounts or cancelled amounts). The Committed Amounts shall not be reduced in the event that there has been any provisioning for losses or reduction in market value due to market value fluctuations of the relevant exposures.

Such level of fees have been calculated on the basis of ensuring EIB cost coverage and EIF remuneration in line with statutory requirements.

The Management Fee shall be calculated as if all the Contributors had committed on the date of the first Contribution Agreement.

Legal, Audit, Consultant and similar Expenses

Include costs, fees and expenses of EIB and EIF external lawyers, auditors, consultants (including in the context of the structuring of and the transactions and operations performed in relation to the Fund) and similar costs, fees, and expenses (including costs, fees and expenses to cover investment fees and costs for the investment of the Cash Balance).

Recovery Fee

EIB and EIF shall charge to the Fund a flat-fee recovery fee for operations that EIB or EIF needs to recover amounts or in case that it applies a restructuring. The recovery fee shall be calculated at the rate of 1% of disbursed but not recovered amounts, subject to an overall aggregate cap of zero point five (0. 5) % of Total Contributions

10. Distributions Waterfall

Any cash flows received under a debt operation of the Fund (other than amounts qualifying as Recovery or Proceeds) that are classified as principal in accordance with EIB’s accounting policies shall be allocated to the reduction of the principal outstanding of the Loan or, for EIF funded debt products, the funding line made available from EIB to EIF to perform funded operations of the Fund.

Loan means the loan/credit facility or facilities made available by the Bank to the Fund to provide financing for the underlying funded transactions.

Proceeds mean any interest, fees, profits, and Recoveries received under the underlying transactions and, for equity transactions, any reflows (including restitution of commitment and distributions).

Recoveries means moneys recovered from underlying transactions.

Proceeds and Recoveries received under an operation of the Fund shall be allocated by the Bank acting on the account of the Fund at the end of each quarter 31 March, 30 June, 30 September, 31 December between the Contributors and the EIB and EIF as follows:

• (a) firstly, to EIB and EIF for Management Fees as apportioned to the quarter in accordance with ACT/360, and Recovery Fees

• (b) secondly, to EIB and EIF for EIB/EIF Legal Audit, Consultant and similar Expenses

• (c) thirdly, to EIB and EIF for FX hedging costs and foreclosure costs and for negative interest on EIB or EIF disbursed amounts, if any;

• (d) fourthly to the EIB for the aggregate interest accrued on the Contributor liquidity facilities (if any) made available by EIB and for the aggregate negative interest on the Contributor Cash Balances, pro rata to each other;

• (e) fifthly, to EIB for the accrued Funding Cost on the Loan or funding line made available from EIB to EIF and/ or in the context of the Fund;

• (f) Sixthly, up to one (1. 0) % of Total Contributions, to the Operational Expense Buffer;

• (g) Seventhly, to the reduction of the principal outstanding of (i) the Loan or (ii) the funding line made available from EIB to EIF to perform funded operations by allocating (A) Proceeds and Recoveries generated by the transactions funded by the Loan to the Loan and (B) Proceeds and Recoveries generated by the transactions funded by the funding line made available from EIB to EIF to that funding line and

• (h) lastly, save for the paragraph immediately below, to each Contributor, pro rata to their Contribution and credited to their Dedicated Register (the “Contributor Share”).

No Contributor Share will be distributed before the end of a period of ten years starting from the effective date of the first Contribution Agreement. After this period, any residual Contributor Share will be credited to each Contributor Dedicated Register, save for 10% of that residual Contributor Share which will be retained by the EIB to cover for future expenses, costs and fees of EIB and EIF, in accordance with the waterfall.

Except for interest accrued on the liquidity facilities, any amount not paid out of the waterfall on one quarterly payment date, unless otherwise paid under the Contribution Agreement, shall remain outstanding until there are sufficient funds to pay such amount on any subsequent quarterly payment date.

Operational Expense Buffer means a buffer which shall be used to pay any shortfall in items (a) - (e) at the end of each quarter, in that order. The balance of the Operational Expense Buffer will be credited to the Contributors pro rata to their Contribution on the Dedicated Register after December 31st 2037.

Payments relating to Demands

Payments relating to Demands under the Guarantee Agreement, shall be treated as cash flows received under the relevant operation of the Fund, except for unfunded transactions, for which such proceeds shall be allocated to the payment of the demands made under these unfunded transactions (including the payment of any fees or costs linked thereto).

Miscalculations

If any mistakes or incorrect determinations (including as a result of inaccurate information provided final beneficiaries or other third parties) have been made by the EIB in relation to the calculation or allocation of any amounts under this Agreement, the parties agree that EIB shall, as soon as it becomes aware of such mistakes or incorrect determinations, rerun any such calculations or allocations in order to correct such mistakes or errors and when necessary, claw back any amounts unduly paid or distributed to any Contributor.

The Fees and Waterfall sections might be discussed and revised at the first or subsequent Contributors’ Committees.

11. Amendments to Fund Description

This Fund Description may be amended from time to time, subject to approval of the Contributors’ Committee of the fund in accordance with the voting rules set out in Article 5 (8) of the Platform Rules.

EIB may, at its own discretion, amend the provisions of this Fund Description to the extent such amendments result from the change in EIB’s and EIF’s rules and policies or from the regulations applicable to EIB’s and EIF’s activities or from the decisions of EIB’s and EIF’s Governing Bodies (“Obligatory Amendments”). If one or more Contributors object(s) to the introduction of the Obligatory Amendments, these Contributors can engage into discussions with EIB regarding the Contribution Agreement they entered into with EIB, if the Obligatory Amendments:

• (i) prevent such Contributor(s) continuing to participate in the Fund in compliance with the laws and regulations applicable to it;

• (ii) require the Contributor(s) to increase the amount of their Contributions; or

• (iii) substantially increase their costs of further participation in the Fund.

12. Special Provisions

The following variations from the Platform Rules or additional arrangements shall apply in relation to the Fund:

12.1 Contributors

In relation to Article 3.1. of the Platform Rules, any Member State of the European Union shall be an eligible Contributor for purposes of the Guarantee Fund. In addition, institutions of the European Union or institutions created by Member States of the European Union can also make Contributions to the Fund.

12.2 Governance

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. 50% of contributors representing 2/3% share of contributions.

Key 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. 50% of contributors representing 80% share of contributions.

12.3 Currency of Contributions and fees

All Contributions as well as fees will be paid in EUR.

12.4 Due Diligence process and EIB Group processes

In light of the extraordinary situation, namely the severe travel 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 EIB Group 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 Financial Instruments

The fund will be continuously managed so as to keep ex ante net expected loss on guarantee commitments at 20% 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 the Contributors Committee on all matters related to risk.

Risk appetite for EIB Financial Instruments

The Fund 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 carries out at its own risk. As a result, Article 12.3 (The Bank acting in specific circumstances) of the Platform Rules shall apply.

Due 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 carries out at its own risk shall not be applicable to the operations, including the provisions of EIB’s Credit Risk Guidelines (“CRGs”), the EIB’s Equity Risk Guidelines (“ERGs”) and the pricing and valuation methodology applicable to operations EIB carries 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) Set 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 carries 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 carries 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 carries 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 carries 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 carries 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.

Risk appetite for EIF Financial Instruments

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

12.8 Special Measures

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. Any 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. The Bank 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 gather such information.

The Contributors Committee and the Board will receive an annual Operational Report on Guarantee Fund 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 Fund Investments 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 manner 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 mandator;

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.

Appendixes:

Appendix A - EIB Product: Risk sharing through NPB/FI

Appendix B - EIB Product: Loan Substitute Structures

Appendix C - EIB Product: Venture Debt

Appendix D - EIF Debt Products

Appendix E - EIF Equity Products

Appendix A - EIB Product: Risk sharing through NPB/FI

PRODUCT INSTRUMENT 1: PORTFOLIO RISK SHARING THROUGH NPB/FI

Implementing Entity	European Investment Bank (EIB).
Product type	Risk sharing (linked) on non-granular/semi-granular/granular pool of credit exposures.
Product family	Funded and Unfunded risk sharing (Risk Sharing).
Structure	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 National Promotional Bank (NPB), for a maximum amount (the “Guarantee Amount”). The Guarantee will cover the credit risk associated with Eligible Transactions contracted with Final Recipients. The Guarantee shall constitute a direct financial guarantee and shall cover up to 80% 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 Banking Practices. To facilitate urgent outreach to target beneficiaries, full delegation structures are possible under an Impact Finance Mandate with 100% risk coverage. Funded risk sharing structures (such as contingent loans) may also be carried out on similar terms.
Product rationale and strategic objective	Ensure uninterrupted access to finance for SMEs, MidCaps and large corporates (through e.g. supply chain operations9) 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 preserve employment.
EIB Counterparty	Financial or credit institutions duly authorised to carry out lending or leasing activities according to the applicable legislation.
Eligible Transactions	Loans and guarantees provided by FI to Final Recipients, including: ⬤ term loans for investments, ⬤ revolving facilities, ⬤ working capital, ⬤ liquidity facilities/ lines, ⬤ short-term loans, including Supply Chain.
Final Recipients	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 Block Exemption Regulation10. 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 Group products.
Policy Objective	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 clause 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.
Geography	All EU participating Member States.
Currency	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).
Risk Participation Rate	50%- 80%.
Tenor	Although still under consideration, the intention is to comply with the maximum tenor requirements included in the Temporary Framework.
Skin-in-the-game	The Financial Intermediary would need to retain at least [20%] of the exposure to preserve an alignment of interest with the EGF.
Operating model	Full delegation.
Project undertakings	⬤ 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 standards. ⬤ 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	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 Impact Finance Mandate nature, EIB would benefit from a 100% guarantee from the Pan-European Guarantee Fund.
Pricing	Fixed fee in line with State Aid Laws (to the extent applicable).
Risk takers	Contributors to the pan-European Guarantee Fund
Others	An EIB Group joint and integrated approach to financial instruments/initiatives with NPB and commercial banks will be implemented.
State Aid	The risk sharing product will be deployed under a bespoke State aid regime modelled on the Temporary Framework as agreed with DG Competition.

Appendix B - EIB Product: Loan Substitute Structures

PRODUCT INSTRUMENT 2: LOAN SUBSTITUTE STRUCTURES

Implementing Entity	European Investment Bank (EIB).
Product family	Loan Substitute Structures/ Guarantees.
Structure	Under Loan Substitute Structure, EIB would purchase/ subscribe/ guarantee a capital market instrument. Risk taking with the support of the Guarantee Fund 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 Own Funds and Eligible Liabilities) issued by a Financial Intermediary in the primary market and at market conditions.
Product rationale and strategic objective	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 Risk-Weighted Assets 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.
Estimated leverage	[8x].
EIB counterpart	Financial or credit institutions.
New Eligible Portfolio	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.
Final recipients	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 Block Exemption Regulation11. 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 Group products.
Policy Objective	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 clause 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.
Geography	All EU participating Member States.
Currency	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).
Tenor	In terms of tenor, the expectation is that generally the tenor will follow the Temporary State Aid Framework in terms of tenors.
Skin-in-the-game	The Financial Intermediary would need to retain minimum levels of the capital structure in line with CRR rules.
Pricing	Depending on the characteristics of the specific instrument.
Risk Takers	Contributors to the pan-European Guarantee Fund
Credit risk	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.
Others	An EIB Group joint and integrated approach to ABS and financial instruments/initiatives with NPB will be implemented.
State Aid	The Loan Substitutes is a wide category that would cover a range of products. Such 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 DG Competition.

Appendix C - EIB Product: Venture Debt

PRODUCT INSTRUMENT 3: VENTURE DEBT

Implementing Entity	EIB
Product family	Quasi-equity
Structure	Equity-type risk financing to innovative and fast-growing SMEs and Mid-Caps structured as debt instrument with upside participation, incl. convertible loans with buyback option.
Product rationale and strategic objective	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 COVID-19 crisis: ⬤ 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 innovation. ⬤ Sector coverage: innovation driven sectors such as life sciences, ICT and engineering 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.
Estimated leverage at Final Recipient Level	[8x]
EIB counterpart	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 Block Exemption Regulation12. 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
Eligible investments	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.
Final recipients	Same as EIB counterparts
Policy Objective	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 clause 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.
Geography	All EU Member States.
Currency	EUR or other EU currencies depending on the targeted area of the project.
Risk Takers	Contributors to the pan-European Guarantee Fund
Eligible Industries	All industries, save for restricted sectors. Special focus on innovation driven sectors (e.g. life sciences, ICT and engineering innovation).
Operating model	Sourcing, structuring, risk appraisal, negotiation, monitoring and restructuring in relation to the investment made by EIB. Ideally, a fast-track procedure should be applied for these operations.
Project undertakings	The portfolio to cover large number of EU Member States to create a diversified portfolio.
Pricing	The product will be priced at market terms.
State Aid	The venture debt product will be deployed on market terms or following bespoke State aid regime modelled on the Temporary Framework as agreed with DG Competition.

Appendix D - EIF Debt Products

Portfolio Guarantees

Capped Guarantee

Product description and policy rationale	The outbreak of COVID-19 is currently affecting EU supply chains and straining solvency of SMEs and mid-caps from every industry with an economic outlook bound to deteriorate further. The capped guarantee aims to improve access to finance for enterprises through limited capital relief and loss protection for portfolios of newly originated eligible transactions, as well as refinancing of existing SME and mid-cap obligations. The instrument is suitable for large, granular and homogenies portfolios whereas final beneficiaries affected by COVID-19 will be able to obtain working capital and investment loans with reduced collateral requirements. The financial intermediaries (FIs) will benefit from a free-of-charge portfolio guarantee provided by EIF covering defaults at a guarantee rate of up to [80%] on a transaction-by-transaction basis. The default coverage will be subject to an overall cap of up to [30%] with respect to the underlying portfolio. The recoveries on defaulted transactions will be shared pari passu by the FI and the EIF in the same proportion as the default cover [i.e. 80%]. Amounts committed by EIF (the Guarantor) to FIs can be reallocated in order to optimise the resource utilisation. The re-allocation can be across products (capped vs uncapped, debt vs equity) and geographies.
Financial Intermediaries	Any type of financial intermediary, including commercial banks, guarantee societies, microfinance institutions, ethical banks, National Promotional Banks or Institutions and other publicly owned intermediaries, alternative lenders, crowdlenders, debt funds, SPVs, leasing companies and any other financial intermediaries authorised to lend.
Benefits for enterprises	Reduced collateral requirements, reduced standard credit risk premium on the guaranteed portion of the loan, extended the maturities.
Guarantee rate	[up to 80%]
Cap rate	[up to 30%] The cap rate is the aggregate net amount which the Guarantor is liable to pay under the guarantee.
Guarantee premium	The EIF aims to deploy the capped guarantee free-of-charge. To ensure the sustainable implementation of the product, the EIF may charge an admin fee to the financial intermediaries. The pricing would also be subject to alignment of the guarantee instrument with State Aid rules.
Beneficiary	SMEs (up to 249 employees), small mid-caps (up to 500 employees), large mid-caps (up to 3000 employees) sole proprietors, individual farmers and agricultural enterprises will be eligible to benefit from the uncapped guarantee. For avoidance of doubt, sole proprietors and individual farmers are eligible.
Structure	[image omitted]
Risk takers	Contributors to the pan-European Guarantee Fund.
Eligible financing	Investment loans, leasing, working capital revolving credit lines (including overdrafts), bridge facilities, documentary finance (bank guarantees, letters of credit, bid bonds), factoring, refinancing of existing obligations, subordinated loans, quasi-equity.
Max principal	Up to EUR [7. 5]m
Maturity	Min [3] months to maximum [144] months
Inclusion period	[24] months
	The date until which transactions with SMEs and mid-caps can be originated by FIs and included in the guaranteed portfolios.
Replenishment	During the Inclusion period, FIs may include new transactions with SMEs and mid-caps in the portfolio to replenish the volumes of expired eligible transactions. For avoidance of doubt, losses on defaulted transactions shall not exceed the maximum aggregate net amount which the guarantor may be liable to pay under the guarantee.
Eligible industries	All industries (agriculture including), safe for EIB Group restricted sectors
State Aid	Implementation of the instrument will follow one of the following state aid schemes: Temporary Framework, de minimis regulation or any other bespoke regime as agreed with DG COMP.
Product advantages and disadvantages	[image omitted]

Uncapped guarantee

Product description and policy rationale	The COVID-19 crisis has affected severely multiple industries, in particular tourism and hospitality, manufacturing, retail trade and transportation, all of which experience a double-digit drop in revenues. EU based financial intermediaries, already operating under strict regulatory capital requirements, face constraints in providing sufficient funding to businesses operating in the aforementioned industries thus increasing the risk of insolvencies as a result of the temporary lockdown measures. The uncapped guarantee aims to improve access to finance for SMEs through full capital relief and loss protection for portfolios of newly originated eligible transactions, as well as refinancing of existing SME and mid-cap obligations. Though the outbreak is likely to affect SMEs to a larger extent, the market feedback shows that large corporates are also vulnerable to drops on both the demand and supply side: the uncapped guarantee instrument is particularly suitable to provide support to less granular portfolios (compared to the capped guarantees) of larger enterprises. The FIs will benefit from a remunerated guarantee provided by EIF, on a loan-by-loan basis, covering defaults, at a guarantee rate of up to 80% in respect of SME transactions included in a given portfolio. The recoveries on defaulted transactions will be shared pari passu by the FI and the EIF in the same proportion of the guarantee cover (up to 80%). Amounts committed by EIF (the Guarantor) to FIs can be reallocated in order to optimise the resource utilisation. The re-allocation can be across products (capped vs uncapped, debt vs equity) and geographies.
Financial Intermediaries	Any type of financial intermediary, including commercial banks, guarantee societies, microfinance institutions, ethical banks, National Promotional Banks or Institutions and other publicly owned intermediaries, alternative lenders, crowdlenders, debt funds, SPVs, leasing companies and any other financial intermediaries authorised to lend.
Benefits for SMEs and mid-caps	Reduced collateral requirements, reduced standard credit risk premium on the guaranteed portion of the loan, extended the maturities, riskier enterprises becoming bankable
Beneficiaries	SMEs (up to 249 employees), small mid-caps (up to 500 employees), large mid-caps (up to 3000 employees) sole proprietors, individual farmers and agricultural enterprises will be eligible to benefit from the uncapped guarantee.For avoidance of doubt, sole proprietors and individual farmers are eligible.
Structure	[image omitted]
Risk takers	Contributors to the pan-European Guarantee Fund, EIB Group, NPIs.
Guarantee rate	[up to 80%]
Guarantee premium	[tbd] First loss piece, covering expected and unexpected losses, is provided free-of-charge, subject to any requirement to align the instrument to State Aid rules. Residual risk taking by the EIF is remunerated.
Eligible financing	Investment loans, leasing, working capital revolving credit lines (including overdrafts), bridge facilities, documentary finance (bank guarantees, letters of credit, bid bonds), factoring, refinancing of existing obligations, subordinated loans, quasi-equity.
Max principal	Up to EUR [7. 5]m
Maturity	Min [3] months to Maximum [144] months
Inclusion Period	[24] months The date until which transactions with SMEs and mid-caps can be originated by FIs and included in the guaranteed portfolios.
Replenishment mechanism	Not envisaged for uncapped guarantees.
Eligible industries	All industries (agriculture including), safe for EIB Group restricted sectors
State Aid	Implementation of the instrument will follow one of the following state aid schemes: Temporary Framework, de minimis regulation or any other bespoke regime as agreed with DG COMP.
Eligible financing	Investment loans, leasing, working capital revolving credit lines (including overdrafts), bridge facilities, documentary finance (bank guarantees, letters of credit, bid bonds), factoring, refinancing of existing obligations, subordinated loans, quasi-equity.
Product advantages and disadvantages	[image omitted]

Counter-guarantee

Product description and policy rationale	The counter-guarantee shall be issued by EIF in the context of the Pan European Guarantee Fund for the benefit of NPIs. It shall cover the credit risk associated with guarantees (also known as Intermediary Transactions) that are included in the counter-guaranteed portfolio. Subsequently, the Intermediary Transactions will be extended by the NPIs to Financial Intermediaries (e.g. commercial banks) with respect to underlying SME transactions. The underlying SME transactions will cover newly originated, as well as refinancing of existing loans, leases, documentary finance products (e.g. bank guarantees, letters of credit, bid bonds), factoring services and others. In order to ensure an alignment of interest between the Financial Intermediary and the counter-guarantee facility, eligible Intermediary Transactions shall be covered by the EIF at a counter-guarantee rate of up to [60%]. The counter-guarantee can be issued by EIF both as a capped or uncapped facilities. In the case of a uncapped counter-guarantee, EIB Group own resources could be deployed to provide additional risk taking capacity. Amounts committed by EIF (the Guarantor) to FIs can be reallocated in order to optimise the resource utilisation. The re-allocation can be across products (capped vs uncapped, debt vs equity) and geographies.
Benefits for SMEs and mid-caps	Reduced collateral requirements, reduced standard credit risk premium on the guaranteed portion of the loan, extended the maturities, riskier enterprises becoming bankable
Counter-guarantee rate	[up to 80%]
Beneficiary	SMEs (up to 249 employees), small mid-caps (up to 500 employees), large mid-caps (up to 3000 employees) sole proprietors, individual farmers and agricultural enterprises will be eligible to benefit from the uncapped guarantee. SMEs (up to 249 employees) and mid-caps (up to 3000 employees)
Structure	[image omitted]
Risk takers	Contributors to the pan-European Guarantee Fund, EIB Group (in case of uncapped counter-guarantee), NPIs.
Eligible financing	Short-term working capital, overdraft facilities, bridge facilities, documentary finance (bank guarantees, letters of credit, bid bonds), factoring, refinancing of existing obligations, investment loans, leasing, subordinated debt, quasi-equity.
Max principal	Up to EUR [7. 5]m
Maturity	Min [3] months to Maximum [144] months
Eligible industries	All industries (agriculture including), safe for EIB Group restricted sectors
State Aid	Implementation of the instrument will follow one of the following state aid schemes: Temporary Framework, de minimis regulation or any other bespoke regime as agreed with DG COMP.
Product advantages and disadvantages	[image omitted]

Inclusive Finance Funded Instrument

Product description and policy rationale	The Funded Instrument aims to improve access to finance for micro-enterprises and SMEs in order to address the emergency of the outbreak, sustain employment and support social inclusion. To this end, the instrument will provide direct lending (senior and subordinated loans) to financial intermediaries to provide financing to SMEs, micro-enterprises and social enterprises.
Structure	The EGF would guarantee the risk arising from the exposure to the portfolio of direct financing to financial intermediaries (in whole or in part).
Product type	Primarily Senior and Subordinated loans (secured or unsecured) to financial intermediaries. Senior Loans: loans made available to Financial Intermediaries and on-lent directly or indirectly to eligible Final Recipients Subordinated Loans: loans with a subordinated credit ranking vis-à-vis certain other forms of financing made available to Financial Intermediaries and on-lent directly or indirectly to eligible Final Recipients.
Transaction Maturity	Loans to FIs can feature a maturity up to 120 months.
Financial Intermediary Beneficiary	Public and private entities of bodies, such as non-banks, microfinance institutions, social finance providers and bank - mainly unrated banks, non-investment grade banks or banks below a certain size - lending platforms, SPVs which provide debt financing to eligible final recipients.
Final Recipients	SMEs, microenterprises, social enterprises.
Underlying products	Senior and subordinated debt, including investment loans, working capital, revolving credit lines and overdraft; quasi-equity; mezzanine loans; leasing contracts; profit-sharing loans to final recipients.
Eligible industries	All industries (agriculture including), safe for EIB Group restricted sectors
State Aid	Implementation of the instrument will follow one of the following state aid schemes: Temporary Framework, de minimis regulation or any other bespoke regime as agreed with DG COMP.

Tranche guarantees and ABS Investments

Tranche guarantees on existing portfolio

Purpose	Provide to European financial intermediaries an instrument to redeploy capital to the benefit of European enterprises.
Value Added	The current economic environment will weight on profitability across the financial sector and will weaken the capitalisation of the financial intermediaries. Under the current circumstances, traditional lenders tend to tighten the credit standards during periods of uncertainty and higher volatility. While transferring the risk on an existing portfolio and redeploying capital, the securitisation would allow financial intermediaries across Europe to expand their capacity to lend to SMEs. The leverage ensured by the securitisation instrument increases the efficiency of the resources allocated to support the extremely high need for financing from enterprises. The intermediaries will commit to provide financing (including working capital lines and/or guarantees) enterprises across Europe for an amount based (i) on the resources allocated and (ii) on the amount of capital redeployed thanks to the tranche guarantee.
Complementarity	1. The proposed instrument will be complementary to portfolio-tranche guarantee measures introduced by local government to support enterprises affected by the current crisis. 2. In addition, its focus on existing portfolios will ensure the complementarity with other products offered by the Pan-EU GF. 3. Given its flexibility, the instrument shall be easily combined with ad-hoc tranche guarantees offered by National Promotional Institutions, national and/or regional guarantee schemes or third party market investors (more relevant in a second moment) 4. This instrument, used in combination with EFSI funds deployed by EIB via securitisation, shall consent a more efficient and effective use of the available funds for the benefit of enterprises across Europe.
Financial Intermediaries	Any type of financial intermediary, including commercial banks, guarantee societies, National Promotional Banks or Institutions and other publicly owned intermediaries, alternative lenders, crowdlenders, debt funds, SPVs, leasing companies and any other financial intermediaries authorised to lend.
Target portfolio	Existing granular portfolios of loans or leasing contracts originated by the Financial Intermediary in any of the EU Country. Indicatively maximum concentration per obligor of 1% of the portfolio size.
Type of instrument	Guarantee Agreement
Proposed transaction Structure	Guarantee (or counter-guarantee) on Tranches of existing portfolios. Such guarantee shall allow the financial intermediary to redeploy the capital allocated to the existing portfolio, in part or in full, to support new financing to enterprises. Depending the type of financial intermediary (i.e., bank with advanced rating model, standardised rating model or non-banking institutions) and the type of portfolio, the Pan-EU GF shall offer guarantee on different type of tranches including, but not limited to: 1. Junior tranches covering expected losses (where expected loss are estimated according to EIF internal methodology) 2. Junior tranches covering expected losses and part of unexpected losses up to the attachment point of a mezzanine tranche indicatively rated B1 (where the internal rating is estimated according to EIF internal methodology) 3. Mezzanine and senior tranche - with rating assigned according to EIF Internal methodology
Additional Portfolio	Depending, inter alia, on the PanEU GF allocated resources and the risk transferred by the financial intermediary, the transaction will support the origination of new financing based on the following (preliminary) target multiples on the allocated resources: Tranche guarantees on existing portfolio
Cost of the guarantee	Senior and Mezzanine tranches will be rated and priced according the credit policies and procedures of the EIF, which are market conform. Junior tranches are typically not rated and are carried out via bilateral transactions between the financial intermediary and the guarantor. In the absence of a market price, the EGF guarantee on the junior tranche will feature a remuneration equal to the lower of (i) 10% and (ii) the sum of 1yrEL of the covered tranche and admin costs. 1yrEL of the covered tranche will be assessed in line with EIF’s credit policies and procedures. The EIF considers as benchmark the premium approved for the Junior Tranche guaranteed by MS under SME Initiative Italy (SISI). For junior tranches with annual expected loss (plus admin fees) lower than the benchmark, the former will apply as remuneration, under the assumption that a private operator entering into the same transaction will seek for remuneration at least equal to the net guarantee calls expected to be paid to the financial intermediary plus admin costs.
State Aid	It is planned that the product will be market conform. Should this not be possible following consultation with DG COMP, an alternative State aid framework will be sought.

ABS Investments

Purpose and value added	Provide liquidity to European financial intermediaries to improve the access to finance of European enterprises affected by the COVID outbreak. by providing working capital lines and/or other type of financing The Pan-EU GF shall ⬤ purchases Notes issued via a bankruptcy remote vehicle securitising an existing portfolio of loans and leasing contracts; and/or ⬤ issue guarantee in favour of third party investors in the Notes on the principal and interest due to them. The liquidity available for the FIs will be then redeployed by providing new financing to European enterprises. In case of securitisation of existing portfolios, the intermediaries will commit to originate a new portfolio of loans, leases, working capital lines, revolving credit facilities and overdraft, and/or other type of financing suitable to address the emergency; the additional portfolio will be originated for an amount based on the size of the purchased notes (see multiplier details below).
Complementarity	⬤ By providing liquidity, the instrument shall be complementary to all other instruments offered by the Pan-EU GF ⬤ This instrument will be essential for non-banking financial institution with no access to the ECB.
Financial Intermediaries	Any type of financial intermediary, including commercial banks, guarantee societies, National Promotional Banks or Institutions and other publicly owned intermediaries, alternative lenders, crowdlenders, debt funds, SPVs, leasing companies and any other financial intermediaries authorised to lend.
Target portfolio	Existing (or new) granular portfolios of loans or leasing contracts (or other financial instruments).
Type of instrument	⬤ Direct investment in notes issued by bankruptcy remote SPVs; ⬤ Guarantees in favour of third investors in the notes issued by bankruptcy remote SPVs.
Proposed transaction Structure	The Pan-EU GF shall purchase (or issue a guarantee to third investors in) senior and mezzanine tranches.
Additional Portfolio	Depending, inter alia, on the PanEU GF allocated resources and the risk transferred by the financial intermediary, the transaction will support the origination of new financing based on the following (preliminary) target multiples on the allocated resources: ABS Cash Investment
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	Junior tranches
	Mezzanine tranches
	Senior tranches
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Cost of the guarantee	Senior and Mezzanine tranches will be rated and priced according the credit policies and procedures of the EIF, which are market conform.
State Aid	It is planned that the product will be market conform. Should this not be possible following consultation with DG COMP, an alternative State aid framework will be sought.

Forward starting Tranche guarantees on new portfolio

Purpose	Provide to European financial intermediaries an instrument for managing capital and losses linked to the COVID-19 on a newly originated portfolio of loans and leasing contracts to European enterprises.
Complementarity	1. The proposed instrument will be complementary to portfolio-tranche guarantee measures introduced by local government to support enterprises affected by the current crisis. 2. Given its flexibility, the instrument shall be easily combined with ad-hoc tranche guarantees offered by National Promotional Institutions or third party market investors (more relevant in a second moment)
Financial Intermediaries	Any type of financial intermediary, including commercial banks, guarantee societies, National Promotional Banks or Institutions and other publicly owned intermediaries, alternative lenders, crowdlenders, debt funds, SPVs, leasing companies and any other financial intermediaries authorised to lend.
Target portfolio	New granular portfolios of loans or leasing contracts (or other financial instruments) originated by the Financial Intermediary to enterprises in any of the EU Country contributing to the Pan-EU GF. Indicatively maximum concentration per obligor of 1% of the portfolio size.
Type of instrument	Guarantee Agreement
Proposed transaction Structure	Guarantee (or counter-guarantee) on Tranches of newly originated portfolios. Such guarantee shall allow the financial intermediary to release capital, in part or in full, on the portfolio. Depending the type of financial intermediary (i.e., bank with advanced rating model, standardised rating model or non-banking institutions) and the type of portfolio the Pan-EU GF shall offer guarantee on different type of tranches including, but not limited to: 1. Junior tranches covering expected losses (where expected loss are estimated according to EIF internal methodology) 2. Junior tranches covering expected losses and part of unexpected losses up to an attachment point for B1 rating mezzanine (where the internal rating is estimated according to EIF internal methodology) 3. Mezzanine and senior tranche - with rating assigned according to EIF Internal methodology
Additional Portfolio	Depending, inter alia, on the PanEU GF allocated resources and the risk transferred by the financial intermediary, the transaction will support the origination of new financing based on the following (preliminary) target multiples on the allocated resources: Forward starting tranche guarantee on new portfolio
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	Junior tranches
	Mezzanine tranches
	Senior tranches
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State Aid	It is planned that the product will be market conform. Should this not be possible following consultation with DG COMP, an alternative State aid framework will be sought.

Diversified Debt Funds