€50 million investment in senior note will allow National Bank of Greece to expand lending to small businesses
In the first SME loan securitisation in Greece since 2007 the European Bank for Reconstruction and Development (EBRD) is investing €50 million in publicly listed senior notes as part of a €648 million offering. The notes are secured by loans provided by National Bank of Greece (NBG) to small and medium-sized enterprises (SMEs) under Greek law.
The purpose of the investment is to support the reopening of structured funding for banks in Greece and to expand lending to local small businesses in Greece.
The notes are issued by Sinepia, a company established and incorporated in Ireland, which has purchased a €648 million SME loan portfolio from NBG with the funds obtained through the bond issuance. The notes are listed on the Irish Stock Exchange and eligible for trading on the regulated market. Recognising the transparent structuring and ample credit enhancement, senior notes were rated BB by S&P Global Ratings and B- by Fitch Ratings. Senior notes withstood investment grade stresses but their ratings were constrained by the respective sovereign ceilings.
The reopening of structured finance for Greek banks signals an important easing of market conditions after years when securitisation as a funding source has not been available.
The successful implementation of the transaction offers Greek banks a viable alternative to volatile short-term deposits and Eurosystem funding and is expected to strengthen investors’ confidence in the country’s banking system.
At the same time the investment will benefit the real economy by addressing the key issue that 30 per cent of Greek SMEs still regard access to finance as their most pressing concern. Restoring and enhancing this access is crucial for the Greek economy’s ability to return to growth.
The EBRD’s €50 million investment will be complemented by an up to €215 million purchase of senior notes by the European Investment Bank and €35 million by the European Investment Fund.
Noel Edison, Director in the EBRD Financial Institutions team, Insurance and Financial Services and Turkey, said: “This is a landmark transaction and the EBRD is very proud to make a substantial contribution. The return of securitisation sends a powerful signal to the market and it provides additional sources of much-needed funds for on-lending to the real economy. Securitisations offer a replicable mechanism which can boost bank lending by creating an efficient use of resources. The private sector will benefit from improved access to finance and this will strengthen the prospects for the Greek economy to return to healthy growth.”
NBG is one of Greece’s four systemic banks which between them hold over 90 per cent of total assets in the financial sector. The EBRD participated in the successful recapitalisation of the banks in October 2015 and has since also provided trade financing facilities.
The EBRD started investing in Greece on a temporary basis in 2015 to support the country’s economic recovery. The Bank’s priorities are strengthening private companies and the financial sector, support for privatisation, infrastructure development and regional integration of the Greek economy.
The EBRD’s strategic plan for the period 2016-18 has three priorities: strengthening economic resilience, addressing global challenges and supporting regional integration.