EIF credit enhancement with top market players for first BPI securitisation transaction

EIF has signed its latest guarantee for a SME securitisation transaction in Portugal, Douro SME Series 1 (Douro), which was launched on 6 April 2005. Originator of the securitised portfolio is Banco BPI (BPI), the fifth largest banking group in Portugal.

Douro is the first securitisation of BPI and the third SME securitisation in Portugal, each one with EIF participation. As to its structure, Douro is only the second public issuance of asset-backed notes through an STC (Sociedade de Titularização de Créditos), a Portuguese securitisation company directly issuing notes to investors. The transaction contributes to an enhanced access of medium and long-term finance for Portuguese SMEs.

The securitised portfolio of EUR 500 million consists of 5,465 loans to 4,863 borrowers. Of the four classes of notes issued, EIF guarantees the senior mezzanine tranche amounting to EUR 26 million, rated AAA/Aaa/AAA thanks to the EIF wrap which covers any shortfalls in interest and principal due to the Class B noteholders.

In addition, the junior mezzanine tranche (Class C Notes) benefits from a guarantee by FGTC, managed by PME Investimentos. The guarantee was issued pursuant to the Portuguese law Decreto-Lei no 188/2002 of 21 August 2002 that provides for public support for securitisation backed by SME loans.

The transaction was arranged by SocGen and was successfully placed at very competitive spreads with a number of institutional investors, which for the senior notes include the European Investment Bank (EIB) and Kreditanstalt fur Wiederaufbau (KfW).

Alessandro Tappi, Head of Guarantees & Securitisation at EIF said, This is a milestone for the European SME securitisation market: BPI brought together top market players which made this deal a great success. Having been involved from the very beginning by undertaking the feasibility study and participating in the structuring of the transaction, it has been a great pleasure for EIF to contribute to its successful closing. The involvement of PME Investimentos, for the first time providing a public guarantee for an SME securitisation transaction, is another demonstration of the importance of securitisation as a means to facilitate access to finance by SMEs.