Page 40 - Annual Report 2010

ANNUAL REPORT 2010

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related issues. The challenging environment for SME se-curitisation will persist, however, and large new issuance

volumes are not expected to return given the still relatively high spreads investors require for SME securitisation notes. There are, on the other hand, clear signals that financial intermedi -aries do want to return, with primary market activity and will use the secu-ritisation market to complement whole-sale funding options. EIF will seek to proactively contribute to the reopen-ing of the market and continue to act in a countercyclical way.

Despite the market turmoil in the past and continuing challenges for SME securitisations, EIF has signed almost EUR 1.1bn of new commitments in the period 2008-2010 (EUR 260m in 2010) and has built up a significant pipe-line for 2011. EIF has achieved on average a “leverage” of 7.5, meaning that its guarantee commitments have trans-lated into the support of approximately EUR 8bn of SME lending and over 40 000 SMEs supported.

Credit Enhancement and Securitisation

EIF credit support enables banks to obtain liquidity and achieve capital relief thus allowing them to expand their SME lending activity.

With its securitisation transactions, EIF acts as guarantor of tranches of SME securitisation transactions.

The European securitisation market has gone through an extremely difficult pe-riod in the last three years with very few transactions placed with market investors. EIF has contributed to the gradual reopening of the SME secu-

ritisation market in Europe, which in the second half of 2010 has seen the first SME transactions emerging with actual placement to third party investors. The first pub-lic SME transaction was originated by Lloyds Banking Group and comprised GBP 807m of loans to UK SMEs. EIF contributed with a guarantee for a mezzanine tranche to further credit enhance the senior notes and give senior note investors additional comfort for the transaction.

It is expected that 2011 will see an increase in trans­ actions, most of which will continue to focus on funding-

Commitments trans-late into more than 40000

SMEs supported in 2010