JEREMIE Holding Fund Greece: Clarification on the Call for Expressions of Interest No. JER-001/2010/2

Question 1 (Q1):

In reference to the Management Fees, Annex 2 (Part 1 section 3. Indicative Summary of Transaction Terms) stipulates that the financial intermediary might receive a 2% fee on an annual basis, calculated on the pro rata share of the average outstanding amount. We would be obliged if you could clarify the following:

-        The outstanding amount on which the calculation is made concerns only the funds being contributed by EIF or the total funds to be disbursed (EIF’s and Financial Intermediary’s)?

-        Who is liable for covering this charge to the Financial Intermediary? The EIF or the Micro – Enterprise?

EIF Answer:

The Management Fee for a period shall be calculated on the average outstanding amount of the Micro-loan portfolio for that period multiplied by the Risk Sharing rate (i.e. 50%). Hence, the basis for the calculation is the average outstanding amount of the JEREMIE funds in the Micro-loan portfolio.

The Management Fee is payable by the JEREMIE Holding Fund and is included within the total amount of JEREMIE funds.

Q2:

According to the call for expression of interest the selected intermediary is obliged to disburse the total amount of 60m€ within 12 months. If the intermediary doesn’t manage to disburse the full amount within the specified period, are any applicable “penalties” imposed? Is it possible to extent the duration of disbursement?   

EIF Answer:

In principle, at the end of Availability Period (or a short period thereafter for amounts committed but not yet disbursed) any unutilised amount paid by the JEREMIE Holding Fund to the selected Financial Intermediary will be cancelled. To this extent, the EIF aims to select Financial Intermediaries which will prove their ability to originate the required lending volumes within the pre-specified Availability Period.

Q3:

What would happen if the selected applicant opts out just before the signing of operational agreement? Are any applicable “penalties” imposed?    

EIF Answer:

Negotiations of the Operational Agreement do not per se entail any obligation for any of the parties to enter into such Operational Agreement.

As described in the explanatory notes relating to evaluation of the Quality Assessment Criteria (cf. ANNEX 2, Part II), if, for any reason, no Operational Agreement is signed with the initially selected Applicant, the EIF reserves the right to approach one of the Applicants inserted in the Reserve List.

While, there are no contractual “penalties” imposed by the EIF to the selected Applicant during the stage of contractual negotiations, please note however that the process of full evaluation/due diligence on an Applicant as well as the contractual negotiations are resource consuming. Therefore, if an Applicant for whatever reasons wishes to withdraw from the process, it should notify the EIF accordingly, as early as possible. More generally, contractual negotiation must be conducted in good faith and the EIF reserves the rights to any available recourse against the Applicant should negotiation be broken off abusively. 

Q4:

What are the obligations occurring to the financial intermediary related to the operational agreement that we will be signed with EIF?

EIF Answer:

As a result of the Operational Agreement, the Financial Intermediary will undertake to originate a new Micro-loan portfolio partly funded from the JEREMIE funds. The origination, due diligence, documentation and execution of the Micro-loans will be performed by the Financial Intermediary in accordance with a pre-set origination model agreed with EIF but otherwise applying all normal standard procedures of the Financial Intermediary.

In this context, the Financial Intermediary shall have the sole direct client credit relationship with each Micro-enterprise.

The Financial Intermediary will be responsible (in compliance with its internal operating guidelines) for the handling of payments, the ongoing monitoring, the reporting to EIF as well as the management and realisation of collateral backing the newly originated Micro-loan portfolio.

Q5:

What is the repayment schedule (duration) and cost (interest rate) for the funds provided by EIF?

EIF Answer:

The duration of the underlying Micro-loans needs to respect the provisions of the Call of Expression of Interest published, i.e. 48-60 months. The repayment frequency of the Micro-loans shall follow the proposal submitted by the selected Financial Intermediary (cf. “Applicants, …. , are also asked to indicate separately the applicable Euribor base rate as well as the expected repayment frequency intended to be applied in the context of this Financial Instrument”; Appendix 2, 1. Project Proposal, c. (dd)).

As regards the repayment schedule from the Financial Intermediary to the JEREMIE Holding Fund, repayments will occur regularly (e.g. quarterly) (cf. ANNEX 2, Part I, 3. Indicative Summary of Transaction Terms, Repayment under the Operational Agreement).

The Financial Intermediary shall pay interest at a commercial interest rate as agreed with EIF under the Operational Agreement on the following funds provided under the Financial Instrument:

1. Funds disbursed to the Financial Intermediary, not yet disbursed to Micro-enterprises by way of Micro-loans (in the case of funding provided ex ante to the Financial Intermediary);
2. Repayments collected by the Financial Intermediary from Micro-enterprises but not yet transferred to the EIF.

In other words, the Financial Intermediary will pay interest to the JEREMIE Holding Fund as long as the funds are within the control of the Financial Intermediary (i.e. before disbursements to Micro-enterprises and after repayments from Micro-enterprises).

Once the funds are disbursed to Micro-enterprises, the borrowed amounts funds will be priced on the basis of a pricing policy to be later on defined by the JEREMIE Holding Fund , taking into consideration however the pricing offer (and collateral policy) submitted by the selected Financial Intermediary under its Expression of Interest. In this context, please note that the JEREMIE Holding Fund intends to apply a reduced pricing on the portion of the loan supported by JEREMIE resources thereby reducing the overall interest rate to be charged to the Eligible Micro-enterprises.

Q6:

According to the eligible forms of micro-financing, the intermediary can provide loans for working capital (raw materials, stock, good and services with the exception of salaries and other operating costs). What would be the exact procedure for disbursing these kind of loans? Asking from micro-enterprises to submit the corresponding invoices or simply rely on customer’s statement in terms of cash flow injection?

EIF Answer:

This Financial Instrument may finance investment and/or expansion loans, including the expense categories presented in the question here above. In the context of ensuring proper deployment of the Financial Instrument (and hence proper spending of the EU budget, financing this programme), the Financial Intermediary would need to require certain evidence and perform certain checks prior and also after the disbursement of the Micro-loans, verifying that the disbursed loans indeed satisfied the loan’s purpose (e.g. loan being indeed an expansion loan). Further details on this shall be discussed with the selected Financial Intermediary in the context of contractual negotiations, but amongst others, the requirements include receipt of invoices and proof of the investment/expansion nature of the project.