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Bulgaria: Clarification of Call for Expression of Interest to select Financial Intermediaries that will receive resources from the JEREMIE Holding Fund to implement Mezzanine Fund(s)

  •  
    Date: 18 November 2010 - 17 January 2011

JER009

Ref.: Call for EoI No. JER-009/4

Clarification Document and FAQ to the Call for Expression of Interest No. JER-009/4 to select Financial Intermediaries that will receive resources from the JEREMIE Holding Fund for Bulgaria to implement the following Financial Instrument: Mezzanine Fund(s). 

The aforementioned call stipulated that: “Requests for clarifications from Applicants shall not receive individual replies. Instead, answers to all requests for clarifications received within the relevant deadline will be published together in a clarification Document to be posted on the website www.eif.org, at latest on 20/12/2010”.

In accordance with this provision, we hereby present such a clarification document complemented with frequently asked questions.

Capitalised expressions utilised below shall have the meaning attributed to them in the above mentioned Call for Expression of Interest, unless otherwise defined below or the context requires otherwise. Questions may appear as they have been received without any editing from EIF; they also appear in a random order.

Question 1

In the case of expression of interest from a consortium, would it be acceptable by the EIF if one of the members is a state owned entity?

 

EIF Answer

There is no set expectation on the consortium structure of the Applicant, as long as the Financial Intermediary fulfils the criteria listed in the Call and is suited for the task.

Question 2

Would it be acceptable by the EIF if the applicant is a company in which one of the shareholders is a state owned entity?

 

EIF Answer

There is no set expectation on the shareholders structure of the Applicant, as long as the Financial Intermediary fulfils the criteria listed in the Call and is suited for the task.

Question 3

Would it be acceptable by the EIF if state owned companies act as private investors in the financial instrument? 

 

EIF Answer

The Fund Manager should raise at least 50% of the Financial Instrument from Private Investors and the portion contributed by a state owned company may potentially not be considered private funding.

Question 4

What is the level of interest on escrow account? Is there a policy into what banks and jurisdiction the money has to be deposited in?

 

EIF Answer

Details of the escrow arrangement, including level of interest and jurisdiction, will be discussed at later stage and set out in the Operational Agreement.

Question 5

Who receives the interest on the escrow (private investors only or split with EIF?) in case (a) the total EUR 60m are invested or (b) the total investments are lower than EUR 60m?

 

EIF Answer

See above on question 4. In any case, the mechanism to be eventually put in place shall ensure that the underlying economic interests of, and the risks taken by the JHF and the Private Investors, will be aligned throughout the existence of the Fund.

It is important to notice that Private Investors under the escrow arrangement will not be requested to transfer funds in excess of what they would transfer in a typical structure.

Question 6

What happens if the funds on the escrow account shall not be used until the end of the investment period? Is the accrued interest split between the private investors and the EIF?

 

EIF Answer

See above on questions 4 and 5.

Question 7

Hurdle Rate / IRR calculation: What are the implications regarding the calculation of the hurdle rate for the EIF and the private investors as 150% are drawn initially?

 

EIF Answer

The IRR (and therefore the hurdle rate) is calculated for each and every investor on the basis of its own contributions drawn down and not yet returned.

 

Question 8

Does the EIF have any preference regarding the Fund set-up legal structures?

 

EIF Answer

The legal structure of the Fund Managers should be established within the European Union and in compliance with the EIF’s Policy on Offshore Financial Centres & Governance Transparency. For more details, please consult the Policy here:

Should an existing General Partner be ineligible, it is possible to set up a new eligible legal structure prior to the signature of the Operational Agreement. Applicants concerned should make this specification as part of the Expression of Interest.

Question 8

As we understood the place of incorporation for the fund manager as well as for the general partner has to be within the EU. Is Jersey an eligible place of incorporation?

 

EIF Answer

Jersey is not an eligible place of incorporation as it is not considered part of the European Union.

Question 9

Does the EIF see a VAT issue with regard to the management fee with an EU based fund structure and e.g. a Bulgarian based management company?

 

EIF Answer

This should be analysed on a case-by-case basis with the selected Applicants.

Question 10

What is the envisaged mechanism by the EIF if the costs incurred by the fund / management team exceed the management fee on a yearly basis?! E.g. cost intensive restructuring efforts. Who is supposed to incur the exceeding amount? The fund manager?

 

EIF Answer

EIF cannot incur any management costs above, on a yearly basis, 3% of the committed capital during the investment period, and of the invested capital thereafter.

Question 11

What is the envisaged structure by the EIF regarding the payment of the management fee to the fund manager (Under the assumption of a management fee of 3% p.a. the total management fee will account EUR 1.8m p.a.)? Will the fee be offset against cash inflows generated by investments and hence will there be EUR 60m net available for investments?

 

EIF Answer

Such fee offset arrangement as outlined above is not envisaged.

Question 12

Does the EIF have any preference regarding levels of disclosure and format of reports from the Manager to the EIF and private investors?

 

EIF Answer

The requirements will be specified in the Operational Agreement.

Question 13

Are equity co-investments eligible? The Annex I does not mention the possibility for equity investments.

 

EIF Answer

It is possible to co-invest with other funds as long as the same terms are applied to all partners.

Question 14

Does JEREMIE provide the possibility for reinvestments? Any limitation on the reinvesting period?

 

EIF Answer

The possibility of reinvestment of proceeds and the respective conditions will be discussed with the selected Applicants.

Question 15

Will co-investments with other funds (e.g. specialized mezzanine funds) be possible?

 

EIF Answer

See above on question 13.



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