European Investment Bank to space sector: We don't fear risk
January 27, 2017
BRUSSELS — The European Investment Bank is inviting both large and small space companies to apply for loans, saying the bank now has a much larger appetite for risk than it once had.
Bolstered by the multibillion-euro European Fund for Strategic Investments, EIB officials said the the bank is now able to invest in projects that are unable to secure bank or other private-sector financing.
Addressing the Conference on European Space Strategy here Jan. 23, EIB Vice President Ambroise Fayolle said European Union’s so-called Juncker Fund allows EIB to make loans it would not have made before because of their possible effect on the bank’s credit rating.
Now these loans are backed by the European Union’s fund. One consequence has been the EIB’s new acceptance of high-risk loans from smaller companies.
In 2016, EIB made loans of 28 million euros ($31 million) to Terma A/S of Denmark, in part to allow Terma to continue work on satellite components.
A second loan, totaling 30 million euros, went to OHB SE of Germany for work on an all-electric telecommunications satellite design called Electra, which has been financed by the 22-nation European Space Agency’s Artes technology-development program as well.
The EIB said the OHB funding would be mainly spent in Germany, with portions of it also going to OHB affiliates in Sweden and Luxembourg.
EIB helps OHB meet ESA matching funds requirement
OHB Chief Executive Marco R. Fuchs said the EIB support made it easier for OHB to match ESA’s Artes support.
“Under Artes rules there’s always a significant ‘own investment by industry,’” Fuchs said. “That’s the whole purpose of Artes. The European Investment Bank was interested in providing a straight loan for the ‘own investment’ and it took just a few weeks to conclude.
“The Juncker Fund, in Artes-type investments, helps industry take bigger risks. That was very helpful.”
Gunnar Muent, EIB’s director for innovation and competitiveness, said the bank had a ceiling of about 5 billion euros per year that could be invested in high-risk debt fore the Juncker Fund arrive. Now it’s more than 20 billion euros, he said.
Muent said Jan. 25 that the space sector has shown increasing increased in corporate loans in recent months, and that EIB is now entertaining investments in public-private partnerships and smaller service providers.
“This is a game-changer,” Muent said. “We are now able to process and extend loans to much smaller companies and much higher risk. We can offer everything from equity to mezzanine debt up to senior debt.
“We are looking forward to many proposals from you, with one caveat: We are not the promoters. We depend on investment ideas from you.”
Muent said that in most cases EIB does not insist on claims against physical assets as part of its loan assessment, which helps service companies conclude deals. So far, he said, the bank has incurred no losses in its Juncker Fund-related activities.
EIB loans are not free. The bank charges a risk margin that Muent said is equivalent to the prevailing market price.
“It’s only that we are replacing those arts of the financing where no commeecial investor would be willing to do the same for the same long term,” Muent said.
He said several companies have pending loan requests related to broadband satellite projects.
Peter B. de Selding