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1
FINOVA – Support Fund to Finance Innovation
FIN-EN -Sharing Methodologies on Financial Engineering for Enterprises
Lisbon Meeting, 26 September 2013
3
PME Investimentos - History
Company founded under the name SULPEDIP (SCR)
Transformation into an Investment Company under the name PME
Investimentos – Sociedade de Investimento, S.A.
1989
1998
Participation of FINOVA in the funding of the VCF
and Business Angels Credit Lines
Launch of the PME Investe V,
VI, VI Amendment
and QREN Investe Credit
Lines
2009
2010
Launch of the first PME Investe (I and II)
Credit Lines under the scope of FINOVA
2008
2010
1989 – 2006Venture Capital Firm
2007 - 2013Management of Public Funds
2012
Launch of the PME Growth Credit Line
jan 2007Strategic Guidelines for the 2007-2009
mandate
New role for the Company
Relinquishing of retail operations by
transferring the portfolio to Inovcapital
2007
Creation of the SAFPRI and the FINOVA Fund -
PMEI appointed as manager
2008
Launch of the PME Growth 2013 Credit
Line and of the Revitalisation Funds
20132003
Creation of the Venture Capital Syndication Fund and the
Guarantee Fund for Securitisation – PMEI appointed
as manager
Launch of the PME Investe
III and IV Credit Lines
4
Management of Public Funds
Fund of funds, to refinance and share risk with venture capital firmsCapital = 45.5 M€
Investments:• Participation in 5 funds = 23.38 M€• Participation in 27 venture capital operations (syndicated) = 17.67 M€• Refinancing of venture capital operations = 2.88 M€
Venture Capital Syndication
Fund
PME Investimentos
Guarantee Fund for Securitisation
Manager
Fund with the aim of providing guarantees to securitisation operationsCapital = 25 M€
Participation:• As guarantor in a Securitisation Operation granted to Portuguese SMEs• European Investment Fund as an Adviser for the securitisation operation• Amount received from the Securitisation Operation (500 M€) went towards granting new loans to SMEs
Manager
Funding: previous EU Framework (ERDF)
Characteristics and investment
5
PME Investimentos – Manager of FINOVA
PME Investimentos’ characteristics and its relevant experience made its appointment as manager for FINOVA possible
PME Investimentos:
A Credit Institution under the supervision of the Bank of Portugal, majority
owned by Public Entities
Manager of the Funds of Funds, originating from State initiatives
Refinances the market, but does not intervene directly in the credit and
capital markets
Proven experience in the management of public instruments for the
refinancing and risk sharing of financing innovation
7
FINOVA - Creation
FINOVA
Strategy / Objectives Governence
Centralisation and coordination of
efforts and resources related to
public interventions intended to
support the funding of companies,
namely SMEs
Encouraging competitiveness by:
Stimulating the participation of
venture capital to support SMEs,
giving preference to the early-
stages of their life cycle and
innovative projects;
Reinforcing the system of mutual
guarantee;
Promoting the contractualisation
of subsidised credit lines.
General Board (GB):- Made up by the participating public entities and the ManagerCompetencies:- To define the fund’s investment policy, deciding on the congruity of all investments with said policy- To deliberate on the regulation proposals related to
the configuration of the instruments and to the activity of FINOVA
- To deliberate on the increase or reduction of FINOVA capital
- To approve financial plans and annual budgets, as well as the accounts and implementation reports
Advisory Board:- Made up by the members of the GB and by entities with economic relevanceCompetencies:- To analyse and issue opinions on FINOVA’s investment strategy- To analyse and issue opinions on the broader guidelines related to the proposed objectives, suggesting new areas of action- To suggest measures which could improve the adequacy of FINOVA to its objectives and policies followed
Created by national legislation (DL 175/2008 dated 26 August), under the scope of SAFPRI (FEI national regulation)
Appointment of PME Investimentosas manager
8
FINOVA - Conceptualisation
Managing AuthoritiesFunders
Participants
Holding Fund
Financial Engineering Instruments
Final Recipients
Revitalisation Funds Funding Line for BAs Credit LinesVenture Capital
Funds
SME
FINOVA
State Funds
Public EntitiesIAPMEITurismo de PortugalIEFPAICEP
Subsidised interestGuarantee fee Subsidy
Granting of funds
Participation in share capital
Funding
Participation in share capital
Participation in share capital
CapitalisationFunding
9
FINOVA - Capital
Subscribed Capital 1.156 M€
Credit Lines965 M€
Since 2008, the year FINOVA was created, the public entities that subscribed its capital committed to
channel 1.156 M€ to the Fund, IAPMEI stands out for holding 89% of the share capital.
As of 30 June 2013, paid-in capital amounted to 953 M€ .
Credit Insurance
30 M€
Venture Capital161 M€
1
Amounts include all financial instruments created within the scope of FINOVA, including those that do not have ERDF funding1
11
Financial Engineering Instruments
Launched in 2008, within the scope of the anti-crisis measures, they correspond to the concern of the funding public entities in facilitating and improving the conditions for access of companies to bank loans
Objectives
Subsidised and Guaranteed Credit Lines:
State Aid State aid in the form of granting subsidised interest rates and guarantee fees, as well as the issuing of the actual mutual guarantee, by increasing the capital of the Mutual Counter Guarantee Fund (MCGF)
Amounts (Credit Lines I and II) - Credit Line I: 750 M€- Credit Line II: 1,000 M€ (specific sub-lines aimed at the General, Commercial and Catering Sectors)
12
Financial Engineering Instruments
- Competitive Interest Rates- Obtaining a mutual guarantee- Subsidised Interest- Payment in full of the guarantee fees
Advantages for SMEs
Subsidised and Guaranteed Credit Lines:
Conditions for Access
Eligible operations Operations aimed at investing in new tangible fixed assets or intangible assets and the increase of working capital related to the increase of activity
- Micro, Small or Medium enterprises- Location – company head office in Mainland Portugal- Company activity in line with the SAFPRI- Without unjustified incidents or defaults with banks- All contributions to the Tax Authority and Social Security have been settled
13
Financial Engineering Instruments
To fill market gaps, allowing enterprises, especially smaller ones, to access venture capital so that they may develop strategies for innovation, growth and expansion
Objectives
Venture Capital Funds:
State Aid State aid (FINOVA) in the form of participation in share capital (subscription of units of participation) of Venture Capital Funds, taking up positions of between 50% and 70%
Tipology The tenders opened in 2009 were aimed at the creation or reinforcement of the following types of Venture Capital Funds:- Innovation / Internacionalisation (10 VCF)- Corporate Ventures (2 VCF)- Early Stages (4 VCF)- Pre-Seed (3 VCF)
14
Financial Engineering Instruments
- Innovation / InternationalisationTo support projects for investment in innovation or promoted by SMEs which want to internationalise- Corporate VenturesTo support projects for the creation of new business units, based on already existing technology-based companies - Early StagesTo support investment projects in the Early Stage phase- Pre-SeedTo support investment projects in the Pre-Seed phase in which, due to their characteristics and the high risk involved, is difficult to get funding
Characteristics / Typology
Venture Capital Funds:
Total capital amount of Funds / Typology- Innovation / Internationalisation: 132 M€- Corporate Ventures: 9 M€- Early Stages: 32 M€- Pre-Seed : 13 M€
15
Financial Engineering Instruments
- Greater access to funding for the development of investment projects
- Access to privileged partners, with management, strategic and financial know-how, and more
Advantages for SMEs
Venture Capital Funds:
Conditions for Access
Eligible operations - Participation, per SME, limited to 1.5M€/12 months, 70% of which must be made in equity or quasi-equity- Investment decisions based on sustainable Business Plans and with the prospect of profitability- May not be operations for consolidation or financial restructuring
- Micro, Small or Medium enterprises- Location – company head office in the Northern, Central and Alentejo Regions- Company activity in line with the SAFPRI (Industry, Energy, Construction, Commerce, Tourism, Transportation / Logistics or Services)
16
Financial Engineering Instruments
To fill gaps in the market, allowing access for companies who wish to develop strategies for expansion, contributing to the acceleration of economic growth and encouraging the renewal of the national business fabric
Objectives
Venture Capital Revitalisation Funds:
State Aid State aid (FINOVA) in the form of participation of share capital (subscription of units of participation) of the Venture Capital Revitalisation Funds, taking up positions of 50%
Tipology The tenders opened in 2012 were aimed at the creation of Regional Venture Capital Revitalisation Funds (created in August 2013 and yet to perform operations):- VCF for Revitalization of the Northern Region- VCF for Revitalisation of the Central Region- VCF for Revitalisation of the Southern Region
17
Financial Engineering Instruments
To support investment projects for expansion, innovation and/or modernisation promoted by SMEs and which are in accordance with the requirements foreseen in the regulatory framework of the ERDF. Projects that are starting off or which are in the process of being set up, promoted by SMEs, may also be eligible for funding
Characteristics
Venture Capital Revitalisation Funds:
Total amount available for investment - VCF for Revitalization of the Northern Region : 80 M€- VCF for Revitalisation of the Central Region: 80 M€- VCF for Revitalisation of the Southern Region: 60 M€
Advantages for SMEs- Greater access to funding for the development of
investment projects- Access to privileged partners, with management,
strategic and financial know-how, and more
18
Financial Engineering Instruments
Venture Capital Revitalisation Funds:
Conditions for Access
Eligible operations - Participations, per SME, limited to 1.5M€/12 months, 70% of which must be made in equity or quasi-equity- Investment decisions based on sustainable Business Plans and with the prospect of profitability- May not be operations for consolidation or financial restructuring
- Micro, Small or Medium enterprises- Location- company head office in the Northern, Central and Alentejo Regions- Company activity in line with the SAFPRI (Industry, Energy, Construction, Commerce, Tourism, Transportation /Logistics or Services)- May not be “firms in difficulty”, in accordance with the Community concept
19
Financial Engineering Instruments
Fill gaps in the market:- Develop the financial market through venture capital investors (Business Angels)- Facilitate the access of enterprises, especially smaller ones and those which are innovation-based, to venture capital so that they may develop their strategies for innovation, growth and expansion.
Objectives
Financing Line for Business Angels (BAs):
State Aid State aid (FINOVA) in the form of granting funding to Vehicle Entities (VE) owned by BAs, with the underlying venture capital investment made by the BAs (funding up to 65% of the amount of each of the venture capital operations)
Vehicle Entities (51 VE) - Majority owned and managed by BAs- Minimum amount of share capital paid in by BAs to the VEs may not be less than 35% of the amount of each of the venture capital operations
20
Financial Engineering Instruments
- Medium-term funding, granted to VEs, with a maximum amount of 500 k€, carried out in accordance with venture capital operations- Return on funding set according to the performance of the underlying venture capital operation- Repayment of funding with asymmetric distribution between FINOVA and BAs:- Distribution of repayment 20% (FINOVA)/ 80% (BA), until BAs are repaid the total amount they invested- Subsequent symmetric distribution (50%/50%), until FINOVA is reimbursed the amount funded- Distribution of remaining proceeds 20% (FINOVA)/ 80% (BA)
Funding characteristics
Financing Line for Business Angels (BAs):
Total amount available for investment 43 M€
21
Financial Engineering Instruments
- Greater access to funding for the development of investment projects- Access to privileged partners, with management, strategic and financial know-how, and more
Advantages for SMEs
Financing Line for Business Angels (BAs):
Conditions of Access
Eligible Operations - Participations, per SME, limited to 1.5M€/12 months, 70% of which must be made in equity or quasi-equity- Investment decisions based on sustainable Business Plans and with the prospect of profitability- May not be operations for consolidation or financial restructuring
- Micro, Small or Medium enterprises- Location – company head office in the Northern, Central and Alentejo Regions- SMEs activity in line with the SAFPRI (Industry, Energy, Construction, Commerce, Tourism, Transportation / Logistics or Services)
23
Results
53% Small enterprises
Credit Lines PME Investe I & II
1.535 M€Total Credit Loans
4.508Loans
Average operation amount 340 k€
42% Northern Region
44% Industrial Sector
Average duration 4.4 years
62% Investment in Fixed Assets
Average number of employees 36
Subsidised and Guaranteed Credit Lines:
24
Results
37% Micro enterprises33% Medium enterprises
19 VCF
22 M€ Invested in SMEs
29 operationsAverage operation amount 744 k€
83% Central Region
72% Services Sector
Number of employees 21
Venture Capital Funds1:
1 Information reported in June 2013
25
Results
>50% Micro enterprises
51 Vehicle Entities
owned by BAs109 Financing
Operations granted to VEs
14 M€ Invested
78 SMEs supported
Average operation amount 180 k€
56% Northern Region
70% Services Sector
Average number of employees 3
Financing Line for BAs1:
1 Information reported in June 2013
26
PME Investimentos Contact Information
Carlos de CastroVice-President and CEO
Telephone numbers:(+351) 21 799 42 74(+351) 21 799 42 75
Additional Information