Investment Plan for Europe supports SMEs and mid-caps in the Baltic countries

• The EIB and EIF have issued a guarantee to Luminor Bank AS for new lending to SMEs and Mid-Caps in the Baltic States.
• This synthetic securitisation transaction with Luminor is part of the EIB Group’s COVID-19 response announced in March to help companies through the current crisis.
• Part of the transaction is supported by the European Fund for Strategic Investments (EFSI), the main pillar of the European Commission’s Investment Plan for Europe.

The EIB Group, consisting of the European Investment Bank (EIB) and the European Investment Fund (EIF), has issued a guarantee to Luminor AS to support new lending to companies based in all three Baltic States. The facility is meant to help mitigate the impact of COVID-19 on the Baltic economies. Through a synthetic securitisation transaction – the first of its kind in the Baltics – between Luminor and the EIB Group (with support from the Investment Plan for Europe), Luminor will provide additional lending to small and medium-sized enterprises (SMEs) and Mid-Caps in these difficult economic conditions. The guarantee structure can support at least €660 million of additional loans and leases to SMEs and Mid-Caps in all three Baltic countries.

Executive Vice-President of the European Commission Valdis Dombrovskis said: “I am glad that with a guarantee under the Investment Plan for Europe, the EIB Group and Luminor bank are joining forces to make at least €660 million of additional lending available, mainly to SMEs and mid-cap companies in Latvia, Estonia and Lithuania. Banks are essential for Europe’s recovery. They keep the economy financed by providing liquidity to households and businesses, and especially to SMEs – the backbone of our economy. The European Union will continue to support businesses in these difficult times to weather the crisis and get the recovery properly underway.”

EIB Vice-President Thomas Östros said: “The EIB Group promised it would support European companies when the economic downturn first became apparent, and we are glad that this support is now becoming available in greater numbers in all three Baltic States. The economic fallout of the COVID-19 crisis is being felt around the European Union, and SMEs especially are among the hardest hit companies. The EIB and the EIF are making available as much financing as possible to help ensure that companies survive.”

EIF Chief Executive Alain Godard added: “The main objective of this transaction is to improve access to finance for SMEs and Mid-Caps during the pandemic. By taking on part of Luminor’s risk-weighted assets, we are creating space for them to lend more to companies in the Baltics. We hope that this transaction will have a signalling effect for other financial intermediaries in the region, by showing the possibilities of Europe’s financing institutions.”

Erkki Raasuke, CEO of Luminor, commented: “We are delighted to work with the EIB Group to increase the availability of funding to Baltic SMEs and leasing customers. This facility, the first of its kind in the Baltics, will support businesses over the long term and is testament to our belief in lending excellence and innovation.”

Luminor will retain a first-loss piece of the securitised portfolio, with the EIF backing the senior tranche, which the EIB will partly counter-guarantee. A further EIB guarantee of the mezzanine tranche benefits from partial backing under the European Fund for Strategic Investments (EFSI), the main pillar of the European Commission’s Investment Plan for Europe.

Nordea has acted as sole structuring advisor for Luminor on the transaction.

Background information:

The European Fund for Strategic Investments (EFSI) is the main pillar of the Investment Plan for Europe. It provides first-loss guarantees enabling the EIB Group to invest in riskier projects. The projects and agreements approved for financing under EFSI have so far mobilised €535.4 billion in investment, benefiting over 1.4 million SMEs.

The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy goals. In 2019 alone, the Bank provided nearly €530 million for projects in the Baltic States. Over the last five years (2015-2019), this figure was well over €2.5 billion.

The European Investment Fund (EIF) is part of the European Investment Bank Group. Its central mission is to support Europe’s micro, small and medium-sized businesses (SMEs) by helping them to access finance. The EIF designs and develops venture and growth capital, guarantees and microfinance instruments which specifically target this market segment. In this role, the EIF promotes EU objectives in support of innovation, research and development, entrepreneurship, growth, and employment.

Luminor is the third-largest provider of financial services in the Baltics, providing banking and financial services to help individuals, companies and institutions (or customers) grow across its home markets of Estonia, Latvia and Lithuania.