The project would consist of an un-funded risk participation facility provided by the EBRD to IKB Deutsche Industriebank AG, a bank incorporated in Germany.
By freeing up IKB‘s risk capital, the operation would efficiently support the financing of SMEs on a larger scale through a wholesale vehicle. Facilitating the entry of middle-tier foreign companies can promote growth of SMEs in the local economies through the creation of joint ventures and networks of production outsourcing, sub-contracting and distribution.
The proposed facility would effectively support the financing of German-owned SMEs operating in the region by capitalising on IKB’s sector experience and strong project pipeline.
Through economic interaction with local suppliers and distributors, this project is expected to have an indirect effect on the local SME sector. The unavailability of long-term finance for SMEs is a severe constraint that this facility aims to ease.
IKB is the leading commercial provider of long-term, fixed rate investment finance to small and medium-sized enterprises (SMEs) in Germany with an impressive track record.
Under the un-funded risk participation facility, the EBRD would risk-share a portion of IKB’s loans to SMEs which are legal entities based in the Czech Republic, Hungary, Poland, the Slovak Republic and Slovenia and either fully or majority owned by German companies. The Bank would essentially rely on IKB’s proven appraisal and monitoring procedures, taking direct exposure to its SME borrowers.
Under the facility, the EBRD would risk-share 35 per cent of the IKB loan pool, consisting of eligible, existing and future loans extended by IKB between 1996 and the end of the commitment period (i.e. two years after the signing of the Risk Participation Agreement).
The proceeds of the loans risk-shared by the EBRD must be used by the German SME borrowers for the financing of acquisition, expansion and/or modernisation investments and related working capital needs in the region.
The IKB loan pool will be a principal amount of up to EUR200 million, out of which the Bank would risk-share 35 per cent, i.e. up to EUR70 million under the facility.
Projects submitted for inclusion in the loan pool will undergo an environmental appraisal based on the EBRD’s Environmental Procedures for Banks. The appraisal will confirm, among other things, that projects comply with national requirements for environment, health and safety and do not involve activities included on the Bank’s Environmental Exclusion List.
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Text of the PIP