European Investment Fund support to SBS Leasing (Banca Lombarda Group) portfolio Securitisation

The European Investment Fund (EIF) has provided guarantees for two tranches of asset-backed securities issued by Lombarda Lease Finance 1 (Italy). Originator of the lease receivables securitised is SBS Leasing SpA, part of the Banca Lombarda Group. The issue, for a total amount of EUR 505 million, consists of 4 classes, two of them being guaranteed by EIF (The EUR 22.5 m senior Class A2, rated Aaa by Moody's, and the EUR 22.5 m mezzanine Class B, rated A3 by Moody's. The Arranger is Credit Suisse First Boston. The portfolio consists of leases to small and medium-sized companies (SMEs) and the lion's share concerns enterprises operating in the northern part of Italy. This is the second SME financing securitisation in Italy for which the EIF provides a guarantee.

SME financing securitisation became a priority for the EIF in 2000, in view of the market development and the EIF mission of contributing to enhance access to finance by European SMEs. The EIF provides an unconditional, irrevocable guarantee of timely payment of principal and interest on mainly BB to A rated bonds. These bonds are wrapped up to an implicit AAA rating level (95% of the EIF's shares are held by AAA rated institutions and that the EIF has a share capital of EUR 2 billion and outstanding guarantee commitments of approx. EUR 1 billion). In 2001, the EIF has already participated in two other transactions, one originated by Banco Bilbao Vizcaya Argentaria in Spain and a second one by Dresdner Bank in Germany.

The EIF was created in 1994; it is the specialized financial institution of the European Union for the support of the creation, growth and development of Small and Medium-sized Enterprises (SMEs). The EIF shareholding has a tripartite structure that comprises the European Investment Bank (EIB, 60%), the European Commission (30%) and several European banks and financial institutions (10%).

The EIF does not finance directly SMEs, but always acts through financial intermediaries. It intervenes through venture capital and guarantee instruments.

The EIF guarantee instruments facilitate access to debt finance by SMEs through the intermediation of a wide range of banks and financial institutions. The latter are allowed to allocate capital to those operations at a rate of 20% in accordance with EIF's status as a Multilateral Development Bank under the European Solvency ratio Directive.