BOV MDB COVID Assist Working Capital Finance Albert Frendo Chief Credit Officer Bank of Valletta
Covid vid-19 Back ackdrop – Movi ving to o the the ne next xt level l : : Th The e ne new no norm rmal l • Unprecedented situation - What will characterize the “New N ormal”? • Fall in demand – a numbers game (tourism, expat community , leisure industry, purchasing power etc.) Liquidity is key to survive • Renewed value proposition with safety an integral Essential drivers: part of delivering the product / service. Changing Prioritise what to spend consumer patterns , behavior and propensities How to source funding • 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!
BOV MDB COVID ID Assis ssist : : Wor orkin ing Cap apit ital l Fina nance To cover working capital requirements and Through a Purpose of shortfall in cashflow resulting from adverse guarantee rate of Facility business conditions following COVID-19 outbreak 90% at facility level and a portfolio cap Eligible SMEs and Large Enterprises established and rate of 50%, banks Enterprises operating in Malta* will be able to offer All Sectors are eligible including Gaming, financing with Transport, Agriculture, Fisheries and Real Estate minimal collateral Activities Eligible requirements and Sectors Exclusions - Unethical and Illegal activities and at an financing to ‘Undertakings in Difficulty’ as at end advantageous December 2019 interest rate. * Determined in accordance with European Commission SME Definition Guidelines https://ec.europa.eu/regional_policy/sources/conferences/state- aid/sme/smedefinitionguide_en.pdf
Eli Eligib ible le Cos osts • 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 ount an and d Lo Loan Cap appin ing Crit riteria ia SMEs up to € 2m , Large Corporates up to € 5m Maximum Loan Maximum amount Higher amounts subject to MDB approval Amount capping broadened to € 10 m for SMEs, € 25m for Large Corporates ensure wider coverage Amount not to exceed: to different entities’ needs Double the annual wage bill of the beneficiary for FY19 or Big tickets availability much dependent on 25% of the total turnover of the beneficiary for Amount each Bank’s risk FY19 or Capping appetite and possibility Alternatively entity has to properly justify its of multi-banked liquidity needs for a period of 18 months for SMEs solutions and for the coming 12 months for large enterprises based on self-certification
Lo Loan Ter erm, , Secu ecurit ity an and State Aid d con onsid ideratio ions Expected 4 years, maximum 6 years, minimum 18 months Loan Term Different guarantee fees and pricing depending on term Shorter term First 6 months on Capital and Interest maturities are Extended moratoria, case by case, not exceeding 1 year Moratorium encouraged given BOV will only consider moratorium on capital repayments the nature of the for the extended period. facility but this is The amount of tangible collateral will be lower than usual very much dependent on the on the strength of the MDB Guarantee feasibility of Additional soft collateral in the form of general Security repayment hypothecs, personal guarantees and pledges including on insurance policies where applicable In line with EU’s Temporary Framework to support the State Aid economy in the COVID-19 outbreak
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 Pricing offered is years earmarked to put • Guarantee fee charged separately for first 2 years, absorbed in the least burden the rate thereafter possible on the entities whilst • Variable interest rate to be charged depends on the size of the taking into account entity and duration requested amongst others the cost of risk and • The maximum variable rate for facilities below € 5 million is cost of guarantees 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
Req equir ired Docu ocumentatio ion • Applications and declarations forms signed by customer Given the current circumstances, scanned signed copies acceptable Documentation to cover • Estimate of the expected financing gap over a 6 to 9 months’ 3 key elements : time horizon after taking into account any cost containment measures being undertaken 1. entity size • Financial information enabling the Bank to establish 2. amount justification feasibility of repayment (e.g. Audited Accounts, Management Accounts, Income Tax Returns supported by 3. repayment feasibility 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
Busin usiness Fund undamentals ls Funding mechanisms will provide necessary liquidity to go through this period. This needs to be complimented with … R eassessment 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
How to o ap appl ply for or BOV-MDB COVID ID Assis ssist Contact your BOV Relationship Manager, Business Centre or Corporate Centre Or Send an email to smefinance@bov.com https://www.bov.com/content/bov-mdb-covid19-assist
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