ProCredit Bank Bulgaria EAD (PCBB) has announced a new agreement with the European Investment Bank Group (EIB Group) to increase support for small and medium-sized enterprises (SMEs) in Bulgaria. The synthetic securitization agreement will provide a de-risking mechanism for PCBB and free up capital to support lending for sustainable investments.
Under the agreement, PCBB will grant new loans totaling BGN 813 million (EUR 416 million) to SMEs and small enterprises with medium capitalization over a three-year period. Nearly 30% of this funding will be allocated to projects related to climate action and environmental sustainability, highlighting the commitment of PCBB and the EIB Group to support the transition to a low-carbon economy.
The enhanced lending capacity of PCBB is made possible through guarantees provided by the European Investment Bank (EIB) and the European Investment Fund (EIF). The EIF will protect the mezzanine tranche (€41 million) and the senior tranche (€254 million) of a portfolio of loans for SMEs, allowing PCBB’s capital to be redirected to support the real economy.
The agreement marks the first capital relief transaction between the EIB Group and PCBB and represents one of the first synthetic securitizations in Bulgaria. This development contributes to the growth of an active securitization market in the country.
A synthetic securitization is a transaction where the credit risk associated with a group of exposures is divided into tranches, and part of that credit risk is transferred to the protection seller (the EIB Group) through guarantees or derivative contracts. This effectively reduces the credit risk and associated capital requirements for the protection buyer.
The new financing is expected to benefit the less developed regions of the European Union, promoting fair growth, social cohesion, and territorial cohesion. It will also contribute to employment and economic growth in Bulgaria.
Mariut Falkstead, CEO of EIF, expressed confidence that the agreement will support sustainable investment and demonstrate the application of innovative financial instruments by the EIF and the EIB Group.
Ivan Dachev, executive director and member of the Board of Directors of PCBB, emphasized the long-term cooperation with the EIF and the EIB, which has enabled effective support for the growth and development of SMEs. He stated that the agreement will finance green investments in line with PCBB’s priority of supporting customers in their transition to a sustainable future.
The European Investment Bank Group (EIB Group) is the long-term financing institution of the European Union, funding investments that contribute to EU policy objectives. The European Investment Fund (EIF) is part of the EIB Group and supports SMEs in Europe by improving their access to finance. ProCredit Bank Bulgaria (PCBB) is a bank focused on providing comprehensive services to small and medium-sized enterprises in Bulgaria and is fully owned by ProCredit Holding AG & Co. KGaA (PCH).
This collaboration between PCBB and the EIB Group highlights the commitment to sustainable investment and the support of SMEs in Bulgaria.
What role do guarantees from the European Investment Bank and the European Investment Fund play in enabling ProCredit Bank Bulgaria to increase its lending capacity for SMEs
ProCredit Bank Bulgaria EAD (PCBB) has recently entered into a new agreement with the European Investment Bank Group (EIB Group) to enhance its support for small and medium-sized enterprises (SMEs) in Bulgaria. The agreement involves a synthetic securitization arrangement that will help de-risk PCBB and provide additional capital for lending to sustainable investment projects.
As part of the agreement, PCBB will be providing new loans worth BGN 813 million (EUR 416 million) to SMEs and small enterprises with medium capitalization over a three-year period. A significant portion of this funding, approximately 30%, will be specifically allocated to projects focused on climate action and environmental sustainability. This highlights both PCBB’s and the EIB Group’s commitment to supporting the transition to a low-carbon economy.
The increased lending capacity of PCBB is made possible through guarantees provided by the European Investment Bank (EIB) and the European Investment Fund (EIF). The EIF will protect the mezzanine tranche (€41 million) and the senior tranche (€254 million) of a portfolio of loans for SMEs, allowing PCBB to redirect its capital resources towards supporting the real economy.
This agreement signifies the first capital relief transaction between the EIB Group and PCBB, making it a noteworthy milestone for both entities. Furthermore, it is also one of the first instances of synthetic securitization in Bulgaria. This development demonstrates the ongoing efforts to strengthen the financial infrastructure in the country and provide better support for SMEs.
It’s great to see ProCredit Bank Bulgaria joining hands with the EIB Group to promote sustainable investment in Bulgaria. This partnership will undoubtedly boost the nation’s efforts towards a greener and more resilient economy. Kudos to both organizations for their commitment to promoting sustainable development.