New options for the Funding for Growth Bond Program and the new MFB warranty programs.
The Funding for Growth Bond Program (NKP) and the Growth Loan Program (NHP) are also gaining in popularity, its able to support the financing needs of companies from small to larger ones at a favorable cost level. There have been several modifications and expansions in connection with the programs in the recent period. Recently, there were changes in the NKP program, while this week the MFB Growth Guarantee Program appeared as a new option for both programs.
Funding for Growth Bond Program
While the NHP seeks to support the finances of small and medium-sized enterprises, the NKP is primarily intended to help to the larger companies by building financing channels other than bank lending. Hungarian National Bank (MNB) originally launched the program in March 2019, in the framework of which the central bank buys bonds issued by non-financial corporations domiciled in Hungary. The program was based on the ECB's bond program, the primary objective was originally to increase liquidity in the corporate bond market. There are several conditions for the application, for example, the stipulation of the central bank that the balance sheet totals of companies exceeds one billion forints, and two audited annual reports are also required.
A credit rating can be provided by any credit rating agency approved by ESMA, the data requirements of the process are similar to a bank credit rating related to loans, but its process and rules differ substantially from it. Out of the 60 bond issuances through NKP, 57 were rated by Scope Ratings, 2 were rated by Euler Hermes and 1 was rated by Moody’s.
In order to mitigate the effects of the coronavirus, MNB increased the NKP’s initially set amount of HUF 450 billion to HUF 1,150 billion in several steps. Recently, some parameters of the program have changed, such as:
New MFB warranty programs
Based on the new Government Resolution passed this week, MFB Magyar Fejlesztési Bank Zrt. announced a Growth Guarantee Program within the framework of the Economic Restart Action Plan.
In case of NKP bonds, MFB guarantees up to 80% of the total face value of the bond, up to 90% of which is guaranteed by the Hungarian State. In the case of a bond with a face value of 100 units, the guarantee of the Hungarian State strengthens the solvency of the bond up to 72 units, and the guarantee of MFB up to a further 8 units. The rate of the fee to be paid by MFB (for the Hungarian State) for the State full payment guarantee is 0.4% per annum of the obligation covered by the state guarantee.
Under the new program, MFB will guarantee bonds with a maximum maturity of 20 years and a maximum face value of HUF 50 billion, and MFB can guarantee up to a total of HUF 500 billion.
In case of NHP loans, MFB guarantees up to 80% of the loan principal amount and up to 90% of this is guaranteed by the Hungarian State. According to the provisions, MFB guarantees loans with a maximum maturity of 20 years and a maximum loan amount of HUF 20 billion. An amount of HUF 50 billion is available for this sub-program.
Within the framework of the third sub-program of the MFB Growth Guarantee Program, MFB may provide a guarantee in the case of a loan or cash loan provided by a credit institution meeting certain conditions.
This sub-program may include the following loan exposures: project loan, investment loan, working capital loan, pre-financing loan, loan redemption, purchase of fixed financial assets, acquisition financing, operational financing or a guarantee given by a credit institution as collateral for their repayment.
In this sub-program, MFB also guarantees up to 80% of the loan principal amount and up to 90% of this is guaranteed by the Hungarian State. According to the provisions, MFB can guarantee loans with a maturity of up to 20 years, up to a maximum of HUF 100 billion. An amount of HUF 150 billion is available for this sub-program.
* * *
In order to mitigate the economic impact of COVID-19, several public funding programs have already been announced, in connection with we have previously created blog posts (for example, MFB and Garantiqa constructions, MNB's NHP Hajrá and NKP loan program, and the detailed rules regarding NHP Hajrá is available here). From the various constructions available, it is important for economic participants to analyze which form of financing - based on the impact of their economic activity - will best help them to mitigate the negative effects of COVID-19 and also help them to grow.
In addition to all this, we see that there are more and more opportunities to strengthen credit quality in connection with NKP. For this reason, it is important that the expected rating related to the issue is thoroughly reviewed by the stakeholders and that the rating process is supported with sufficient efficiency.
We support our clients in connection with the analysis of the above and we also support our clients with rating related topics.
© 2021 KPMG Hungária Kft./ KPMG Tanácsadó Kft. / KPMG Legal Tóásó Ügyvédi Iroda / KPMG Global Services Hungary Kft., a magyar jog alapján bejegyzett korlátolt felelősségű társaság, és egyben a KPMG International Limited („KPMG International”) angol „private company limited by guarantee” társasághoz kapcsolódó független tagtársaságokból álló KPMG globális szervezet tagtársasága. Minden jog fenntartva.
A KPMG globális szervezeti struktúrával kapcsolatos további részletekért kérjük látogassa meg a https://home.kpmg/governance oldalt.