Working Capital Finance Albert Frendo Chief Credit Officer Bank of - - PowerPoint PPT Presentation

BOV MDB COVID Assist

Working Capital Finance

Albert Frendo

Chief Credit Officer Bank of Valletta

Covid vid-19 Back ackdrop – Movi ving to

• the

the ne next xt level l : : Th The e ne new no norm rmal l

• Unprecedented situation
• What will characterize

the “New Normal”?

• Fall in demand – a numbers game (tourism, expat

community , leisure industry, purchasing power etc.)

• Renewed value proposition with safety an integral

part of delivering the product / service. Changing consumer patterns , behavior and propensities

• Transitional period till consumer’s confidence is

restored

• Changes in work practices, uses of space and use of

technology. Planning and forecasting – a key challenge! Liquidity is key to survive Essential drivers:

• Prioritise what to spend
• How to source funding

BOV MDB COVID ID Assis ssist : : Wor

• rkin

ing Cap apit ital l Fina nance

Purpose of Facility To cover working capital requirements and shortfall in cashflow resulting from adverse business conditions following COVID-19 outbreak Eligible Enterprises SMEs and Large Enterprises established and

• perating in Malta*

Eligible Sectors All Sectors are eligible including Gaming, Transport, Agriculture, Fisheries and Real Estate Activities Exclusions - Unethical and Illegal activities and financing to ‘Undertakings in Difficulty’ as at end December 2019

* Determined in accordance with European Commission SME Definition Guidelines https://ec.europa.eu/regional_policy/sources/conferences/state- aid/sme/smedefinitionguide_en.pdf

Through a guarantee rate of 90% at facility level and a portfolio cap rate of 50%, banks will be able to offer financing with minimal collateral requirements and at an advantageous interest rate.

Eli Eligib ible le Cos

• sts
• Salaries of employees, including social, health security payments
• Lease of establishment, including rental costs, energy and water bills,

fuel etc.

• Unpaid invoices due to a decrease in business revenues in respect of

working capital and other similar commitments (Trade Creditors)

• Unpaid invoices in respect of investment expenditures contracted

prior 2nd April 2020 and not covered by existing bank loan facilities

• Acquisition of material and stock for continuation of business
• Cancellation or postponement of contracts COVID-related expenses

excluding penalties and other liabilities incurred due to non- performance of contracts

• Maintenance costs
• Interest cost on listed securities

Lo Loan Amou

• unt an

and d Lo Loan Cap appin ing Crit riteria ia

Maximum Loan Amount SMEs up to €2m, Large Corporates up to €5m Higher amounts subject to MDB approval €10 m for SMEs, €25m for Large Corporates Amount Capping Amount not to exceed: Double the annual wage bill of the beneficiary for FY19 or 25% of the total turnover of the beneficiary for FY19 or Alternatively entity has to properly justify its liquidity needs for a period of 18 months for SMEs and for the coming 12 months for large enterprises based on self-certification

Maximum amount capping broadened to ensure wider coverage to different entities’ needs Big tickets availability much dependent on each Bank’s risk appetite and possibility

• f multi-banked

solutions

Lo Loan Ter erm, , Secu ecurit ity an and State Aid d con

• nsid

ideratio ions

Loan Term Expected 4 years, maximum 6 years, minimum 18 months Different guarantee fees and pricing depending on term Moratorium First 6 months on Capital and Interest Extended moratoria, case by case, not exceeding 1 year BOV will only consider moratorium on capital repayments for the extended period. Security The amount of tangible collateral will be lower than usual

• n the strength of the MDB Guarantee

Additional soft collateral in the form of general hypothecs, personal guarantees and pledges including on insurance policies where applicable State Aid In line with EU’s Temporary Framework to support the economy in the COVID-19 outbreak

Shorter term maturities are encouraged given the nature of the facility but this is very much dependent on the feasibility of repayment

Gu Guarantee Fee ee Struc tructure

1 - 4 Years Maturity 5 - 6 Years Maturity

BOV MDB COVID ID Assis ssist In Interest Ra Rates

• Interest rate 2.5% fixed for first 2 years, variable rate thereafter
• Rebate of 2.4% on interest paid expected from MDB for first 2

years

• Guarantee fee charged separately for first 2 years, absorbed in

the rate thereafter

• Variable interest rate to be charged depends on the size of the

entity and duration requested

• The maximum variable rate for facilities below €5 million is

3.00% over Euribor floored at zero for Corporates and 2.75% for SMEs

• Facilities over €5 million will attract a variable rate of 4% over

Euribor floored at zero

Pricing offered is earmarked to put the least burden possible on the entities whilst taking into account amongst others the cost of risk and cost of guarantees

Req equir ired Docu

• cumentatio

ion

• Applications and declarations forms signed by customer

Given the current circumstances, scanned signed copies acceptable

• Estimate of the expected financing gap over a 6 to 9 months’

time horizon after taking into account any cost containment measures being undertaken

• Financial

information enabling the Bank to establish feasibility

• f

repayment (e.g. Audited Accounts, Management Accounts, Income Tax Returns supported by Profit and Loss Accounts )

• Any projections if these are considered necessary for the

proper assessment of the proposal

• Documentation in support of the loan amount eligibility

Documentation to cover 3 key elements: 1. entity size 2. amount justification 3. repayment feasibility

Busin usiness Fund undamentals ls

Funding mechanisms will provide necessary liquidity to go through this period. This needs to be complimented with …

• Reassessment of the business model ensuring liquidity

and cost containment and leveraging value added activities

• Debt containment - new borrowings would need to be

repaid from future profit margins

• Reassessment of value proposition which needs to be

adapted to the new covid-19 realities

• Reassessment of the resources required to create value

The new normal will instill the fear of the unknown but may create also opportunities for those who are able to see them

https://www.bov.com/content/bov-mdb-covid19-assist

Contact your BOV Relationship Manager, Business Centre or Corporate Centre

Or

Send an email to smefinance@bov.com

How to

• ap

appl ply for

• r BOV-MDB COVID

ID Assis ssist