In the last moment, the outgoing government is trying to do something with the tens of millions of euros to be paid to companies under the Jeremy programme. For over a year it did not find the time but on July 9 (two weeks before the expected resignation from power) The Council of Ministers approved the draft mandate agreement between the Ministry of Economy, the European Investment Fund and Jeremy Bulgaria for the creation of a new financial instrument – the Mezzanine Fund. The loudly proclaimed news that small businesses will soon be able to benefit from the 60 million in that fund proved to be a great PR move. But the truth is that the fund had to start work at the beginning of last year, if the political crisis in the country had not slated it to rest in a dead-end street. In fact, this again may happen if in the next two to three weeks the Parliament fails to ratify the agreement.
„We had long and fruitful negotiations with the European Investment Bank, the European Bank for Reconstruction and Development and the Black Sea Bank for Trade and Development. We now expect the MPs to do their job. Otherwise, I fear that the fund will fail to start working. What is reassuring is that projects that have already been waiting for funding are opened,“ said Deputy Prime Minister Daniela Bobeva.
Companies that will be eligible for receiving funds must have annual revenues between 5 million and 50 million. The fund will grant between 2 million to 5 million levs for a project, and the funding itself will be a hybrid one – something between debt and equity (Editor’s note: which is why it is called the Mezzanine fund) and will be used for expansion of business and the purchase, construction and restructuring of companies. This means that it will be able to support between 40 and 50 Bulgarian SMEs. Priority will be given to funding sectors with added value where there is a finished product, such as industry, manufacturing and others. It will not invest in companies engaged in the manufacture and trade of weapons, gambling, tobacco, human cloning and genetically modified organisms.
Otherwise the Mezzanine Fund will be managed by Bulgaria Mezzanine Capital – a joint venture created between Growth Capital Partners AG and Rosslyn Capital Partners. The former company is owned by the largest mezzanine fund manager in Central and Eastern Europe – Mezzanine Management Central Europe. The latter is Bulgarian, founded in 2002 by Mr. Evgeniev, Spas Shopov and others, and has already established five private equity firms with over 30 direct investments made primarily in Bulgaria.
Overall, the vast financial resources of the Jeremy, which was taken from the direct financing of companies scheme, is not used in the most effective manner. In practice, only three of its six funds are functioning and have a demonstrable success. These are the Guarantee Fund, the Fund for Risk Sharing and the one for initial funding for start-ups. Apart from the Mezzanine, which is yet to be launched, what are still stalled are the venture capital fund and the one for co-financing. This became clear from the report of the Ministry of Economy, which was released in late June during the last inspection of the Monitoring Committee of the Competitiveness Programme.
Out of the available 301 million euro under the Guarantee Fund what is utilized is more than 97%. The guaranteed loans are over 4,600 in number and for a total of 291 million euros. The instrument for risk sharing awarded 1,900 low-interest loans for a total of 250 million euros from a total of 400 million euros. The fund for provision of initial capital, that is managed by Eleven LAUNCHub companies, allocated about 40% of their 21 million euros.
As for the venture capital fund, managed by NEVEQ, it is said it only had signed preliminary investment agreements with three technology companies. But how much of the available 20.4 million euros there is already in use is not clear. The situation is similar with Co-investment Fund, which has at it disposal 50 million euros. It has not even signed contracts with selected managers who need to manage it: Empower Capital and BlackPeak Capital.
If one looks at the entire Competitiveness programme, the picture is as follows: with a budget of 2,273,096,041 levs as at July 2 it has signed contracts for 2,370,220,461 levs, or by 4.3% over the funds it manages. The spending, however, is much less – only 1,563,744,569 levs, which is 68.8 percent of the total amount. Moreover, the bill includes nearly 700 million levs, given to Jeremy. In fact this makes the actually disbursed funds stay at almost half what is available.
However, while for the old programming period things are more or less clear, the fog about the future programme Innovation and Competitiveness was never raised. It is almost certain now that the Bulgarian business will not be able to take advantage of its funding this year. Hopes that in the autumn of 2014 the first procedures under EU funds will be opened sank just after the last version of the Partnership Agreement with Brussels was not approved.
The BANKER
