Coronavirus: EIB to rethink use cases for €700m ag loan program

Agriculture and bioeconomy loan program intended to part-fund corporate projects worth €15m to €200m could provide working capital loans.

The European Investment Bank could use its €700 million agriculture and bioeconomy loan program to provide working capital to businesses, said its vice-president Andrew McDowell.

“Normally for a product like this we’re financing capital formation – we’re financing investment,” McDowell told Agri Investor. “In the context of this crisis, we are going to broaden our eligibility criteria on a temporary basis to include working capital to try to address the liquidity needs of large parts of the economy, that are running into issues because of the shutdown.”

The €700 million facility, launched at the start of April, was intended to provide direct loans of between €7.5 million to €50 million for investment projects worth €15 million to €200 million.

Ferran Minguella, EIB head of unit, operations department, said the bank did not “want to operate products that are not looking at what is happening in the real world.” Minguella added: “We do foresee this product being adaptive in relation to the context.”

The bank is also considering lifting the cap on the share it can take in an investment project, currently set at 50 percent to help mobilize commercial capital, due to a potential withdrawal from banks.

“It may become unrealistic to expect full 50 percent co-financing from other sources,” said McDowell.

“We will also look at, on a temporary basis given this crisis, increasing our proportion of the financing of the overall project from 50 percent to a significantly higher level, given the difficulties promoters are going to face in getting financing elsewhere.” McDowell did not provide a figure for what the new cap would be.

The €700 million program is the continuation of a 2018 €400 million program that targeted the same sectors and was fully deployed in Q1, having supported projected with a combined total value of around €930 million, Minguella confirmed.

The EIB still had a pipeline of projects it could support worth between €500 million to €700 million, which prompted the bank to extend the loan programme.

Businesses have until the end of 2020 to gain approval for their loan requests under the new facility, because it is guaranteed by the European Fund for Strategic Investments which will be pulled at the end of the year. For projects approved before year-end, the EIB has until 2022 to sign final contracts.

The European Fund for Strategic Investments will be replaced by Invest EU from 2021, for which the EIB will be the main delivery channel, said McDowell.

“We would certainly expect that agriculture and bioeconomy would still be a beneficiary of direct corporate financing under Invest EU,” he added. “It may also be the case that where the bank has picked up more expertise and comfort than it had before EFSI, that it may be willing to do without the benefit of the EU guarantee and just work on our own balance sheet and risk.”