EIF signs securitisation transaction with FTPYME Bancaja 1

The European Investment Fund (EIF) has provided a guarantee for a mezzanine tranche of a securitisation transaction issued by FTPYME BANCAJA 1 Fondo de Titulización de Activos (Spain) and arranged by JP Morgan. The securitised portfolio consists of loans to small and medium-sized companies (SMEs) originated by Caja de Ahorros de Valencia, Castellón y Alicante (Bancaja). The lion's share of the portfolio concerns enterprises operating in the region of Valencia.

The issue, for a total amount of EUR 600 m, has 5 classes of notes : 4 senior classes and a mezzanine tranche. A subordinated line of credit granted by Bancaja completes the capital structure. Two of the senior tranches carry an Aaa/AAA rating due to the explicit guarantee by the Spanish Treasury (within the framework of the FTPYME Programme). The mezzanine tranche is rated Baa2/BBB and is guaranteed by EIF through a bilateral agreement with the bondholder.

Noting that this is the second SME financing securitisation in Spain for which EIF provides a guarantee, EIF Chief Executive Walter Cernoia, added that the current transaction would strengthen EIF's track record of credit enhancement in securitisation of SME financing in the region and would confirm the EIF ability to work with a number of different players in the securitisation arena.

The EIF was created in 1994; it is the specialised 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 SMEs directly, 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 reduced risk weighting of 20% in accordance with EIF's status as a Multilateral Development Bank under the European Solvency Ratio Directive.