Approval of BIO Emergency Facility up to 50 million EUR
BIO, the Belgian Investment Company for Developing Countries, will provide emergency financing to its portfolio companies to support their continuity in times of the covid pandemic.
In order to allow BIO to act quickly and effectively, the Belgian government has adapted the current management contract between BIO and the Belgian State on July 3rd to give BIO the flexibility to quickly provide additional loans and risk capital to clients affected by the covid pandemic. The amendments mainly concern procedural aspects and financing conditions relating to capital grants. Apart from that, the requirements for BIO’s interventions as stipulated in the current management contract, such as additionality, remain fully in force.
BIO provides up to EUR 30 million from own resources for emergency financing. In addition, the government will initially provide 20 million euro of additional resources for emergency financing of projects with a particularly high development impact, but with an extra high risk and a lower return.
BIO now has the opportunity to offer bridging loans or extra capital to its clients in a quick and uncomplicated way. By doing so, we can save tens of thousands of jobs.
Many companies supported by BIO have been or will be directly or indirectly affected by the consequences of the covid pandemic. The reserves, buffers and other forms of recovery capacity of the companies in which BIO invests directly or indirectly are generally lower than those of companies in industrialized countries. With the disappearance of suppliers or markets, heavy losses and increased depreciation, their survival may be at stake and they urgently need additional resources.
The sources of liquidity to which these companies have access in normal times, such as credit lines with (local) financial institutions, dry up. These financial institutions need their own financial resources and must take measures to protect their financial position and ensure their liquidity and solvency. Companies in existential need in Africa, Asia and Latin America cannot count on private capital either. The risk is considered too high. As a result, such companies are at risk of running up a major financing gap which, if not filled, could have disastrous consequences for the continuity of the companies concerned and the well-being of their employees.
The impact on BIO's portfolio and consequently its own financial position follows the situation of its portfolio companies. Their difficulties in repaying loans or even paying interest lead to reduced income for BIO, and possibly also to provisions or even write-offs. The latter also applies to write-downs on capital investments and to reduced income on the sale of those capital participations. Therefore, the emergency financing not only supports clients in need, but also contributes to BIO's own capital preservation.
Luuk Zonneveld, CEO of BIO, explains: "Western governments have freed up hundreds of billions to support their companies to survive the covid crisis. Governments in developing countries do not have those resources. That's why I'm happy that BIO now has the opportunity to offer bridging loans or extra capital to its clients in a quick and uncomplicated way. By doing so, we can save tens of thousands of jobs."
For more information
CDC Group, Norfund, Finnfund, FinDev Canada and BIO jointly commit $82 million to Phatisa’s second food fund, a Sub-Saharan African fund aiming to create over 2,000 jobs in food and agriculture and to increase agricultural output by 3m tonnes.
An interview with Luuk Zonneveld, An-Heleen De Greef & Eric Van
Den Bossche on the SDG Frontier Fund, published in Eventail on the 10th of December, written by Cédric Boitte. This article was published in French.
In July it was announced that Feronia was facing bankruptcy and was to undergo a financial restructuring in order to secure the long-term future of PHC, its palm oil business located in the Democratic Republic of the Congo. On November 23rd, 2020, the formal restructuring agreement between the company and its lenders was signed.