The European Bank for Reconstruction and Development (EBRD) is investing up to €50 million in senior notes under an SME collateralised loan obligation structure. The underlying loans in the asset pool are originated and sold by Alpha Bank of Greece to Alpha Proodos D.A.C.
The asset pool is composed of working capital and investment loans to small and medium-sized enterprises (SMEs) originated and sold by Alpha Bank of Greece to Alpha Proodos D.A.C. The securitised pool will have a one year revolving period.
The EBRD subscription to a senior note of up to €50 million will be part of an expected €640 million transaction. The transaction structure envisages the issuance of approximately €320 million in senior and €320 million in mezzanine/junior notes.
The EBRD is subscribing to €50 million of the senior notes. The European Investment Bank and Citibank are subscribing to the remaining senior notes and Alpha is subscribing to the mezzanine/junior notes.
The successful transaction will support Alpha to access medium-term funding. Proceeds from the transaction will facilitate the expansion of Alpha’s SME loan portfolio and contribute to better matching assets and liabilities in terms of maturity.
Alpha is one of the four systemic banks in Greece with total assets of €66.2 billion as of September 2016. The Hellenic Financial Stability Fund is its largest shareholder and the EBRD is one of the institutional shareholders.
Noel Edison, EBRD Director, Head of Financial Institutions and Insurance in Turkey, said: “As an international financial institution the EBRD has a special responsibility and we are proud to invest in this transaction. Our aim is not only to provide funding for SME portfolio growth, but also to convey a message of trust and confidence. The success of the project will send a strong signal to the market and is expected to attract more commercial investors to consider investing in collateralised debt issues by Greek banks.”
Demetrios P. Mantzounis, Managing Director and CEO of Alpha Bank, commented: “The successful completion of the SME securitisation is an essential step to reviving Greek entrepreneurship and the economy. We welcome the participation of the European Investment Bank, the EBRD and Citibank, an international investment bank. Their participation demonstrates the confidence of the market in Alpha Bank and its business portfolio”.
The reopening of structured finance for Greek banks signals an important easing of market conditions after years when securitisation as a funding source has not been available.
The investment will benefit the real economy by alleviating the shortage of credit supply for Greek SMEs. About a third of Greek SMEs regard access to finance as their most pressing concern. Restoring and enhancing this access is crucial for the Greek economy’s ability to return to growth.
The successful implementation of the transaction offers Greek banks a viable alternative to volatile short-term deposits and Eurosystem funding and is expected to strengthen investors’ confidence in the country’s banking system.
The EBRD started investing in Greece on a temporary basis in 2015 to support the country’s economic recovery. The Bank’s priorities there include strengthening private companies and the financial sector, support for privatisation, infrastructure development and regional integration of the Greek economy. To date, the EBRD has invested more than €700 million in 14 projects in Greece.
The EBRD’s strategic plan for the period 2016-18 has three priorities: strengthening economic resilience, addressing global challenges and supporting regional integration.