Bpifrance to provide equity and loans to French-SL joint ventures

Wednesday, 28 February 2018 00:00 -     - {{hitsCtrl.values.hits}}

French public investment bank Bpifrance has expressed interest in providing equity for French-Sri Lankan joint ventures in Sri Lanka, in addition to facilitating loans through its export credit agency.

Bpifrance Area Manager for ASEAN Marianne Wlassewitch, speaking at a discussion in Colombo yesterday, said that the French investment bank could support Sri Lankan ventures with French capital participation by providing equity.

Wlassewitch expressed confidence that opportunities would arise in Sri Lanka where Bpifrance could provide such equity on both the French and Sri Lankan sides.

According to Wlassewitch, Bpifrance, a fully French-government owned entity intent on developing export finance solutions mostly targeting small and medium enterprises (SMEs) and mid-cap companies, has three main areas of focus: innovation, international development and SMEs and mid-caps.

"We're a very strong entity of the Government to finance innovation, R&D, tech projects, etc. France is often called an R&D haven. We›re not a tax haven, that›s for sure, but we›re an R&D haven, because Bpifrance is there to finance innovative projects," said Wlassewitch.

Internationally, according to Wlassewitch, the investment bank is getting "stronger and stronger" in supporting French companies overseas as well as their partners.

"Of course, we have solutions for big multinational French companies but we do need to have special solutions for smaller companies with special requirements for them to grow and become stronger. This is illustrated by the fact that we don't only have offices in Paris, we have offices everywhere in France - over 50 offices, in fact," she said.

Bpifrance has three main branches: a financing division, an equity division and an export credit agency.

The finance division, according to Wlassewitch, explores the possibility of lending money, and providing guarantees to banks as well as subsidies and interest-free loans. These services are provided primarily to French companies, but there are exceptions, she said.

Bpifrance›s equity division deals with capital investment.

"That could be for any sized company. It means providing venture capital for very small innovative startups, maybe comprising two persons, until we have more than a third of the cap 40 big companies in which we have participation,"said Wlassewitch. 

"It's really any sized company and any kind of investment capital," she added.

Bpifrance also has what Wlassewitch called strong activity of funds of funds (FoF), although that particular investment branch is mostly limited to France.

"We do have a few FoF activities overseas for investment: When we invest in other capital investment funds, which we can sometimes do abroad," she said.

The investment bank also directly invests its equity overseas in the acquisition of joint ventures of French companies.

"I heard there are some joint ventures in Sri Lanka with French companies. We can support them by providing equity in the capital of a company here in Sri Lanka on the side of a French company on the side of a Sri Lankan company. I'm very confident we will have such opportunities," she said.

The third branch, the French export credit agency, is of the most interest to Sri Lanka. It offers prospection insurance, credit insurance, exchange rate insurance and bank guarantees and pre-financing insurance.

According to Wlassewitch, the guarantees are for securitising international contracts.

"[This applies to] contracts that French companies have with Sri Lankan companies, meaning we recover any risks of non-payment. We offer this so that banks are able to provide the financing to the client›s company. That›s export credit. It›s covered by French public funds."

This could be a "really high amount"sometimes. 

There are three sources of financing coming from the French Government, said Wlassewitch, two of which are loans directly from the French Ministry of Finance, loans from the French Agency for Development. 

"The third source is more indirect because it›s thanks to the export credit agency. And then you have the commercial bank entering the game," she said.

According to Wlassewitch, this works usually for amounts higher than 20 to 30 million euros. For this reason, she said, Bpifrance has decided to be more than just a guarantor.

"Within our first branch, we›re already able to provide loans. We decided to also develop an export credit solution in loans for small amounts under 25 million euros."

For example, a Sri Lankan company looking to acquire French equipment for 5 million euros can get a loan from Bpifrance, the commercial bank and the insurer. This will take the shape of a mid-to-long-term loan to finance French equipment, infrastructure or engineering services.

"The idea is that because it›s mid-to-long-term, we can finance something long-term like engineering, etc. Things like that are eligible for financing."

The benefits of this initiative for the French supplier, she said, a complete turnkey solution which goes beyond the machinery and financing.

"The supplier is also free of any risk, because it gets paid back immediately.

The benefits for the buyer is to also have a turnkey solution and financing without having to look for another source of financing," said Wlassewitch.

"It's a good way of financing: competitively. It›s also a way of diversifying sources of financing," she added.

Bpifrance›s minimum amount, when it plays the role of the bank, is 1 million euros, which is something it›s capable of doing up to 25 million euros. The banks are usually not interested in deals below that amount, she said.

There›s a catch, however. Not only must there be a French exporter, there needs to be French content too.

This, according to Wlassewitch, is looked at on a case-by-case basis. A French exporter selling industrial goods manufactured in China, for example, it will not work.

"Something has to be designed or engineered or manufactured in France.

That›s our requirement. The minimum is 20%," explained Wlassewitch.

Bpifrance also only finances 85% of the contract, requiring a minimum down payment of 15% on the part of the client, whether it's provided in cash or as a loan that will be contracted via a commercial bank.

At present, the public investment bank only lends money in euros, but Wlassewitch expects it should be able to lend in dollars in the coming years.

The mechanism of financing is mid-to-long-term, with a maturity rate of two to 10 years, with repayment usually starting only upon completion of contractual obligations. Bpifrance offers a grace period of three to four years.

"You start repayment only after you deliver. It›s designed to be a very good financing solution. We are under OECD regulations, and I think it›s a fair and competitive solution,» she said."(HK)

-Pix by Lasantha Kumara