Loans

EBRD loans to private-sector projects usually range between a minimum of €3 million and €250 million. The average loan amount is €25 million.

The EBRD's loans are structured with a high degree of flexibility to provide loan profiles that match the needs of clients and projects. This approach determines each loan currency and interest rate formula.

The basis for a loan is the expected cash flow of the project and the ability of the client to repay the loan over the agreed period. The credit risk can be taken entirely by the Bank or may be partly syndicated to the market. A loan may be secured by a borrower's assets and/or it may be converted into shares or be equity-linked. Full details are negotiated with the client on a case-by-case basis.

Loan features

• Loans are usually between €3 million and €250 million, although the amounts can be smaller in certain cases
• Fixed or floating rate
• Senior, subordinated, mezzanine or convertible debt
• Denominated in major foreign or local currencies
• Short- to long-term maturities of up to 15 years
• Project-specific grace periods may be incorporated

Interest rates

EBRD loans are based on current market rates and are priced competitively. Following a successful enquiry and once a project has been presented to the Bank, financial terms can be discussed in detail with banking staff. The EBRD does not subsidise projects, nor does it offer soft loans.

The Bank offers both fixed and floating interest rates (such as SOFR).

As the type of rate directly affects profitability, a project's financial structure may include both floating and fixed-rate loans. The mix is evaluated with regard to client and project sensitivities to interest rate movements.

Fees and charges

A margin is added to the base rate. The margin is a combination of country risk and project-specific risk. This information is confidential to the client and the EBRD.

In addition to the margin, the EBRD may charge some of the following fees and commissions:

• front-end commission, paid up-front
• a commitment fee, payable on the committed but undisbursed loan amount
• prepayment, cancellation and late-payment fees are also charged if necessary
• in line with commercial practice, sponsors will be obliged to reimburse the Bank for out-of-pocket expenses, such as fees for technical consultants, outside legal counsel and travel expenses.

Other lending terms

Full lending terms are negotiated with the client for each project.

Recourse

Recourse to a sponsor is not required. However, the EBRD may seek specific performance and completion guarantees plus other forms of support from sponsors of the kind that are normal practice in limited-recourse financing.

Insurance

The Bank requires project companies to obtain insurance against normally insurable risks. Examples include theft of assets, outbreak of fire, and specific construction risks. The EBRD does not require insurance against political risk or non-convertibility of the local currency.

Security

The EBRD usually requires the companies it finances to secure the loan with project assets. These can include:

• mortgage on fixed assets, such as land, plant and other buildings
• mortgage on movable assets, such as equipment and other business assets
• assignment of the company's hard-currency and domestic-currency earnings
• pledge of the sponsor's shares in the company
• pledge over the company’s bank accounts
• assignment of the company's insurance policy and other contractual benefits
• covenants.

Typical project finance covenants are required as part of the loan package. Such covenants, limiting indebtedness and specifying certain financial ratios and various other issues, will be negotiated.

Loan repayment

Repayment is normally in semi-annual instalments. Longer maturities may be considered on an exceptional basis, for example, up to 18 years for large infrastructure operations.

Hedging possibilities

The Bank can help manage financial risks associated with a project's assets and liabilities. This covers foreign exchange risk, interest rate risk and commodity price risk. Risk hedging instruments include currency swaps, interest rate swaps, caps, collars and options and commodity swaps.

Projects that are too small to be financed directly by the EBRD can still benefit from our investments.

The EBRD supports local commercial banks, which in turn provide loans to SMEs and municipalities. Tools that may be available include credit lines, bank-to-bank loans, standby credit facilities and equity investments in the local banks.

Micro, small and medium-sized enterprises (MSMEs) should contact local banks directly to access finance and check local requirements and investment limits. Loans to MSMEs are available from these banks across the EBRD regions.

Businesses looking to obtain loans through local banks should provide:

• Sound business plans for establishing or expanding a company’s business.
• Solid management with a proven track record.
• Products that are competitive in the marketplace.
• Information on owners/partners.
• Financial history.
• Security in the form of pledges, mortgages, etc.
  
  

Funds provided must be used in strict accordance with the aims stated in the original business plan.

In line with the EBRD’s mandate, banks ensure that all proposals pay due regard to environmental issues.

Funding cannot be provided to majority state-owned companies or for government-guaranteed projects.

In addition, equity contributions, either in existing or new business, of around 35% are often required.