Dutch civil service pension scheme ABP together with the Netherlands’ three largest banks – ABN Amro, ING and Rabobank – has created a €400m facility to provide subordinated loans to COVID-stricken Dutch firms.
The facility is meant to serve usually profitable companies that want to increase their investments but are being hindered by weakened corporate finances because of the COVID-19 crisis.
The three banks and ABP believe the loans package “can foster the recovery in investments by Dutch companies and thereby the growth of the Dutch economy in the post-COVID period”, ABP said in a press release.
The so-called ‘Post-COVID growth financing initiative’ cementing the loan pledge was also signed by the Dutch banking association NVB and employers association VNO-NCW. MKB Nederland, the branch organisation for SMEs in the Netherlands, however, did not sign the pact.
The €509bn ABP said the loans are meant “mostly for larger SMEs” as the amount per loan will range from €5m to €50m. ABP will take a 50% stake in each of the new loans, though the fund has the possibility not to invest in specific individual loans.
“We will individually assess each loan request and decide whether or not to participate,” an ABP spokesperson told IPE.
€25m EBITDA required
The initiative has explicitly not been designed to “save” companies from bankruptcy as it is only accessible to companies with an average EBITDA of at least €25m “over the past few years”. ABP declined to specify whether the COVID-year of 2020 will be included in these calculations.
Commenting on the loan initiative, ABP’s president Corien Wortmann said: “ABP likes to invest in the Netherlands to stimulate sustainable economic growth and employment. When fitting and possible, we provide targeted long-term financing for Dutch companies that are healthy in their core.”
The duration of the subordinated loans will be six to eight years, and the returns are “attractive”, according to Wortmann who declined to elaborate further on the expected returns.
Subordinated loans are “a fixed part” of the pension fund’s credit portfolio, according to a spokesperson. ABP invests in subordinated loans of both Dutch and foreign firms directly and through external funds.