EBRD helps improve Completion Assurance guarantee value for Family Office project funding
Winter 2021 / 2022; updated 14 Jan 2022
Our Completion Assurance Program™ hinges on the developer or sponsor’s ability to facilitate a usable guarantee instrument (Step 3 here). By special arrangement, the European Bank for Reconstruction and Development (EBRD.com), a development finance institution that is part of European Investment Bank, can help our clients by issuing a back-to-back guarantee for qualifying mid-market projects seeking funding through our Completion Assurance Program but that happen to lack adequate guarantor bank strength.
Where? This applies to any country — any of EBRD’s 60 member countries as well as any other country where we work. Banks throughout the developing world often are more regional or local, and lack the financial depth needed to issue guarantees used as project completion assurance, either based on face value (if below $18-20 million) or if the bank’s rating would otherwise not unlock advantageous financing terms.
When would you need EBRD’s facility? The preferred issuing bank is normally A-rated (such as by Moody’s), where the issued guarantee (traditionally a Bank Guarantee or Standby Letter of Credit) would be valued at or near the face value. Most guarantees automatically receive a “haircut” — discounting the commercial value by the beneficiary (for In3, that would be our capital partners). We ordinarily make up for the gap between the issued face value and commercial value, but when the proposed spread would be too great, or the guarantee would fall below our minimum standards (either below ~$18-20M in size, or from a lower-quality bank, or both), EBRD can be used to take in that guarantee then reissue it to our partner’s bank using EBRD’s good faith and excellent credit standing.
To which banks does this apply? This can be applied to any real bank’s guarantee, no matter the size or rating (even some unrated banks), but note that there are a handful of notorious “fake” banks that claim to be legitimate, but are known instead to be scamming/fraudulent. Be careful you are not getting tangled up with any of those. More
EBRD’s facility was available through calendar-year 2021 on a trial basis, but has proved to be so successful, it has been extended for 2022.
If this applies to your situation, please let us know when you approach us with the proposed guarantee that you wish to involve EBRD.
