IFD provides € 2.8 billion to the economy
At the end of 2016, within the so called Phase 1 of the IFD project, € 1.1 billion in financial instruments of debt and equity were already available and in operation, based on endowments from European Structural and Investment Funds (ESIF), known as “EU funds”, from the various Operational Programmes (OP) of Portugal 2020 (OP North, OP Centre, OP Lisbon, OP Alentejo, OP Algarve and Compete), and from IAPMEI, in the case of the national co-financing of the guarantee lines:
1. A Credit Line with mutual guarantee of € 1 billion (LCGM), for investment and corresponding working capital. The maximum loan per operation can be up to € 4.125 million. Contracted with virtually all the banks operating in Portugal and with the Mutual Guarantee Societies.
2. A Line of Reversible Equity Operations (OCRv) with a total of € 40 million of equity available for companies (€ 20 million from IFD + € 20 million private), which constitutes a pilot with OP North. FC&QC, managed by IFD, takes equity stakes of up to € 750 thousand per operation in economically viable companies that comply with previously defined minimum thresholds, provided there is an institutional investor matching that investment. This restriction results from the structural funds’ rules. IFD intends to extend these OCRv to non-EU funds as soon as possible, allowing, for example, current shareholders of target companies to provide the private co-financing to FC&QC’s investment, namely through the conversion of shareholder loans into capital, as well as the participation of other entities.
3. A Line of Financing to special purpose vehicles (SPV) owned by Business Angels (BA) with a total of about € 30 million (LBA) of equity available to companies (€ 18 million from IFD + € 12 million private). The first two investment by SPV owned by BA were approved before the end of the year and, more recently, two other operations were also approved.
Which will turn into € 1.3 billion in the coming weeks, as a result of:
4. A Line for Venture Capital operations, with a total of about € 230 million (LCR) in equity available to companies (€ 100 million from IFD + € 130 million private), whose prior hearing period is under way and which should be available soon. Within this line, given the very high quality of the applications presented by private funds with a demand of twice the amount available, IFD has requested a reinforcement of the public endowment, a request which is under evaluation, pending the evolution of the execution of these first amounts.
5. A second Line of Financing to special purpose vehicles owned by Business Angels, with a total of about € 30 million (LBA) in equity available for companies (€ 18 million from IFD + € 12 million private), whose Call for Applications was launched in January 4th, 2017.
And will continue to grow in the first half of 2017, since:
6. The managing authority of OP Azores has also approved the Financial Instruments Programme, intending to provide the companies of that region au to € 100 million in debt and equity financing solutions over the coming years, co-financed with EU funds, designed between IFD and that managing authority during 2016 and which will be managed by IFD. This new programme, with Calls to be published in the coming weeks, will reinforce the supply in the Credit Line with Mutual Guarantee and Equity components (Business Angels, Venture Capital and Reversible Equity), in a global amount of funds from that OP of about € 20 million.
7. The negotiations with OP Madeira are in the final stage and will allow IFD to manage the equity Financial Instruments, co-financed by EU-funds, in that region. The process is expected to be concluded during the first half of 2017.
Outside the scope of EU funds, within the so-called “Phase 2” and “Phase 2+1” of the IFD project, and considering the publication, in November/2016, of the authorization by DG Competition for the extension of the scope of activity of IFD:
1. IFD is officially negotiating a € 500 million loan with the European Investment Bank – EIB, which IFD will then re-lend to banks (on lending), which commit to matching that amount, making available to companies a total of € 1 billion in credit, including very long term operations. This loan should be contracted during the first half of 2017.
2. Very recently, the Government attributed to IFD the financial management of a new fund FITEC – Innovation, Technology and Circular Economy Fund, whose technical management will be ensures by ANI, with an initial endowment of € 15 million.
3. Within the European Fund for Strategic Investments (EFSI), commonly known as Juncker Plan, a process was initiated that should result in the operation of a line originating in COSME and Horizon 2020, expected to reach also € 500 million and equally to be contracted in the first half of 2017, with the intervention of IFD and the National Mutual Guarantee System.
4. The Corporate Transformation Fund – FTE is in the final stages of conception and design, This fund should be financed through sources other than EU funds, thereby eliminating some of the investment restrictions brought by those funds and incorporating solutions for specific areas which are prohibited for EU funds, such as corporate succession, restructurings and turnarounds, revitalisation, debt and equity crowdfunding and securitization, as well as more flexible reversible equity operations.
As for the so-called “Phase 3” of the IFD project, which included the integration into a single holding company of the various State-owned companies dedicated to financing companies and internationalization, namely SPGM, PME Investimentos, Portugal Ventures and SOFID, providing their operations with strategic coherence and optimizing resources in common or potentially shared areas, a final decision from the authorities is necessary, on whether or not the process will continue and in what way.
In summary, even excluding eventual endowments for the Corporate Transformation Fund (FTE), IFD already has € 1.1 billion available to companies, with some specific operations already approved, and will, by the end of 2017, probably within the first half, about € 2.8 billion available for financing Portuguese companies, divided between debt and equity solutions, a significant amount in the Microeconomic and company financing environment in Portugal, especially by the equity solutions made available and which are so necessary in our country!