EIF signs innovative deal to assist Micro Finance Institutions in Eastern Europe

On 30th November 2005, European Investment Fund (EIF) and Symbiotics S.A. concluded a highly innovative deal that raises funding through the capital markets for micro-finance institutions (MFIs) in the Balkans. EIF acted as structurer and co-arranger with Symbiotics S.A., a consultancy company with extensive micro-finance experience. The MFIs come from seven Balkans countries and form part of Opportunity International, a worldwide micro-finance sponsor.

Through this asset-backed funding deal, MFIs in Eastern Europe secure long-term funding on flexible terms to support continued growth in their micro-lending activity. Despite the small size of the micro-loans (a few thousand Euro on average), there is a high potential in terms of business productivity gains and job creation supported by this important niche lending activity. It is estimated that the transaction will result in the direct financing of at least some 20,000 new micro-loans.

The deal is expected to create a benchmark for further deals targeting the micro-finance market. Micro-lending has been identified as a key objective in the EU and also in the United Nation's Year of Micro-Finance in 2005.

For the first closing, EIF and Symbiotics S.A. have sourced assets in emerging markets in Albania, Montenegro, Romania and Russia. A second and third closing are scheduled for April and October 2006, which would bring total notes issuance up to approximately EUR 30m and would include assets in Bulgaria, Macedonia and Serbia. All underlying assets are senior unsecured term loans to MFIs.

KfW-Entwicklungsbank acted as sole underwriter of the senior notes guaranteed by EIF. The mezzanine notes and junior notes were placed with specialised investors in the Netherlands, Switzerland and the US.

Alessandro Tappi, Head of Guarantees and Securitisation at EIF said, This transaction has been an exciting challenge from the very beginning. It provides MFIs with an efficient means of tapping the capital market. We are keen to collaborate on more deals of this type over the coming years. I foresee high demand from MFIs in CEE and the Balkans for new funding and a clear potential for structured finance solutions.

We are delighted to be part of this groundbreaking transaction, which allowed us to support the first multi-seller CDO transaction designed for a single network, said Vincent Dufresne, General Manager of Symbiotics. The success of this transaction is a further milestone to bring more sophisticated refinancing techniques to the microfinance institutions and a benchmark for our relationship with Opportunity International and the European Investment Fund.

The transaction was structured under the Luxembourg Securitisation Law of March 2004 and uses the various investor protection mechanisms provided for therein. The securitisation company, Microfinance Loan Obligations S.A., Luxembourg, was structured to allow EIF and Symbiotics S.A. to carry out simple execution of repeat deals in the micro-finance market out of segregated compartments established within the securitisation company, thus eliminating any risk of cross-contamination between transactions. The co-arrangers were advised by a team from Luxembourg law firm Arendt & Medernach, headed by partners Philippe Dupont and Ari Gudmannsson.

About Symbiotics S.A.
Symbiotics is a professional services company offering innovative investment intermediation services to micro-finance investors and fund managers. The team is composed of nine micro-finance experts with over two hundred cumulated micro-finance transactions closed and five years of experience in micro-finance monitoring systems, notably for the World Bank and the United Nations. Symbiotics offers sophisticated investment advisory services for microfinance investment funds, including ongoing investment monitoring services, and acts as transaction arranger.

About KfW-Entwicklungsbank
On behalf of the German federal Government and as a member of KfW Bankengruppe, KfW-Entwicklungsbank is a leader in the field of microfinance. KfW finances investments and accompanying advisory services in developing countries. Learn more at www.kfw-entwicklungsbank.de

Contacts at EIF
Alessandro Tappi, Head of Guarantees & Securitisation, +352 42 66 88 352, a.tappi@eif.org
Per-Erik Eriksson, Senior Structured Finance Manager, +352 42 66 88 316 p.eriksson@eif.org