Tag: p2plending

CARDO AI supports BorsadelCredito.it with Banca Valsabbina and Azimut in a new securitization of € 200 million to support Italian SMEs

This transaction follows the previous securitization of € 100 million launched in September 2020, as part of the “Slancio Italia” project.

The new resources of € 200 million will be disbursed on BorsadelCredito.it through loans to SMEs with a maximum duration of 6 years, with 1 year of pre-amortization, and an amount ranging from € 50,000 to € 1,500,000 with a guarantee of up to 90% of the Italian Governmental Central Guarantee Fund (in Italian: Fondo Centrale di Garanzia) for SMEs.

This new securitization will help SMEs to cope and overcome the crisis linked to the spread of the pandemic. The operation, which sees the collaboration of BorsadelCredito.it – ​​the Italian fintech that supports SMEs in accessing credit – with the Valsabbina Bank – Brescian bank present with 70 branches in Lombardy, Veneto, Emilia-Romagna, Piedmont, and Trentino-Alto Adige – Azimut – one of the biggest asset managers in Italy – and CARDO AI – providing institutional investors with advanced technology for private markets to make better investment decisions, is aimed at supporting the real economy.

Compared to the operation of September 2020, the amount available to SMEs has increased from € 100 to € 200 million, thus guaranteeing Italian SMEs firepower for their growth strategies and better crises navigation.

The loans will have a maximum duration of 6 years, including one year of pre-amortization, an amount ranging from € 50,000 to € 1,500,000, and the guarantee of up to 90% of the Central Guarantee Fund (in Italian: Fondo Centrale di Garanzia) for SMEs. The companies applying for the loan will be evaluated within 24 hours based on the credit assessment conducted by BorsadelCredito.it through the use of proprietary artificial intelligence algorithms. The automatic process is then followed by verification of a credit analyst and subsequently the underwriting and disbursement of the loan within a few working days.

The “Slancio Italia” project was launched at the beginning of the pandemic, in March 2020, and is managed by BorsadelCredito.it and financed by credit funds such as Azimut as part of the strategic agreement between the two companies established in May 2020 with the creation Azimut Capital Tech. Azimut also covers the fundamental role of the underwriter of the junior part through its private debt funds. Banca Valsabbina supported the two companies as the arranger of the transaction, Account Bank, as well as underwriter of the senior and mezzanine part, for a maximum commitment of € 180,000,000. CARDO AI, a fintech supporting institutional investors in modernizing their portfolio management with advanced technology and data science. In this particular operation, Cardo AI has acted as the data agent role, facilitating an end-to-end data management and ad-hoc reporting creation. Every institutional investor that has subscribed the notes of the securitization vehicle has received a dedicated access to the Cardo AI platform, enabling a complete transparency at the begging and throughout the lifetime of the operation.

Hogan Lovells Studio Legale provided legal assistance as transaction legal counsel, with a team led by Partner Corrado Fiscale. The Master Servicer will be Centotrenta Servicing S.p.A., while Banca Finanziaria Internazionale S.p.A. (in short Banca Finint) operates in the roles of Paying Agent, Issuing Agent, and Representative of the Noteholders (in short RoN).

Since the outbreak of the pandemic, businesses have not stopped needing liquidity. According to the most recent Istat data, in 2020 there was a decline in the turnover of service companies by 12.1%, the largest since 2001. “The loss of turnover affected almost all the sectors surveyed, particularly in the activities most affected by the restrictions related to the health emergency”, writes the statistical institute.

In this context, in 2020 Fintech came to the rescue of companies for 1.65 billion euros (ItaliaFintech data), with an increase of 450% compared to the 372 million again disbursed in 2019. Also the number of new Italian companies getting support by Fintechs, which rose from 1,092 in 2019 to 5,464 in 2020.

Gabriele Blei, CEO of the Azimut Group, comments: “This initiative is in line with our project of Banca Sintetica, which is an alternative to the traditional banking model to support the needs of small and medium-sized Italian enterprises through the use of fintech platforms with which to finance businesses effectively and quickly. Our goal is to deliver to Italian SMEs, loans of 1.2 billion euros over the next 5 years and to do so we can count on the support from our diverse range of alternative customer lending strategies both private and institutional. A project that allows us to create new performance opportunities for the capital of our customers, fueling the virtuous circle between private savings and businesses”.

“After the securitization carried out last year, we are happy to be a partner of this new operation, which doubles the resources made available to SMEs – said Marco Bonetti, Joint General Manager of Banca Valsabbina – Our institute will continue to look favorably on initiatives like this, which on one hand are an important element to support SMEs, which in particular in times of crisis such as the current one should be supported especially in terms of liquidity, and on the other hand confirm the importance and value of the cooperation between the traditional banking system and fintech, a sector in which Borsadelcredito.it is positioned as one of the most attractive” Bonetti concluded.

“We believe that the path of collaboration is the main way to truly innovate the finance world and make it more efficient and more functional to needs, including emerging ones, of the real economy – comments Ivan Pellegrini, CEO of BorsadelCredito.it – In a delicate period like what Italy is facing, we felt the need to make our skills available to provide resources to all those healthy SMEs that are having moments of difficulty but want to restart and look to the future. This is why we are pleased to have partners such as Banca Valsabbina and Azimut, with whom we have created a solid and structural alliance: for us, it is an evolution, we are no longer just providers of loans to the real economy, but technological enablers for traditional finance”.

“Data is now the world’s most valuable asset. We see every day how it empowers smarter and safer investment decisions and how it can bring unparalleled transparency and intelligence by replacing antiquated manual processes and streamlining the reporting workflow – comments Altin Kadareja, CEO of Cardo AI.  – As data agents, we are thrilled to participate and support this securitization transaction granting investors easy access to the normalized loan-level data along with fully integrated analytics and reporting tools, where users can review composition, analyse performance, and project collateral and tranche cashflows.

“BorsadelCredito.it con Azimut e Banca Valsabbina in una nuova cartolarizzazione da 200 milioni.” Finance Community, financecommunity.it/borsadelcredito-it-con-azimut-e-banca-valsabbina-in-una-nuova-cartolarizzazione-da-200-milioni.

EU Taxonomy: A tool for ESG transition or a nightmare?

A practical guide on main steps and cases study results on how to comply with the EU Taxonomy

The EU Taxonomy is one of the most significant developments in sustainable finance and will have wide-ranging implications for investors and issuers working in the EU and beyond. This tool helps investors navigate the transition to a low carbon, resilient and resource-efficient economy by assessing to what degree investment portfolios (both equity and fixed income) are aligned with the European environmental objectives:

  1. Climate change mitigation
  2. Climate change adaptation
  3. Sustainable use and protection of water and marine resources
  4. Transition to a circular economy
  5. Pollution prevention and control
  6. Protection and restoration of biodiversity and ecosystems

As with all other regulations, nothing comes easy. Applying the taxonomy requires a five steps approach that in reality becomes seven or eight steps depending on the data availability, internal ESG readiness and the disclosure level of the invested companies.

One of the key disclosures that investors need to make is the definition of the proportion of underlying investments that are Taxonomy-aligned, expressed as a percentage of the investment, fund, or portfolio – including details on the respective proportions of enabling and transition activities.

Source: Cardo AI analysis

To do that, investors need to go through the following steps:

Step 0 – Translate every sector/industry classification system to NACE economic activity code

To determine eligible economic activities in the Taxonomy, investors need to map the current classification system in use: e.g. NAICS or BICS (already mapped by the Taxonomy), GICS, ICB, SIC, TRBC, etc. with the European industry classification system (NACE).

Step 1 – Break-down invested company’s sectors by turnover or capex, and if relevant opex to determine if these activities are listed in the Taxonomy

Starting from the turnover, investors need to be able to break down the sectors of activity in which the company’s funds are allocated (both equity and fixed income). Successively, map these sectors to the list of taxonomy and flag those sectors that are present.

Step 2 – Validate if the companies meet the substantial contribution criteria

Every company in the portfolio is required to validate whether or not each economic activity meets substantial contribution criteria to climate mitigation and/or adaptation objectives. Substantial contribution is assessed through different screening tests carried out based on a collection of thresholds by sector.

To do that, investors need to have ready the data reported from the companies. In case data is not available – due to lack of reporting – an estimation of the data point or an approximation of the threshold could be a solution to determine the significant contribution.

Step 3 – Validate if the companies meet the “do no significant harm” criteria

The third step requires investors to conduct a due diligence-type process to verify the company’s activities meet the “do no significant harm” to the other environmental objectives using a set of qualitative and quantitative tests. They are typically applied at the company level looking at the production process or in the use phase and end of life treatment of the products produced.

Step 4 – Control if there are any violations of the social minimum safeguards

Investors need to conduct due diligence to control any negative impacts on the minimum safeguards related to UNGP (United Nations Guiding Principles on Business and Human Rights), OECD (Organisation for Economic Co-operation and Development), and ILO (International Labour Organization) conventions. OECD guidelines for MNES (Multinational Enterprises) ensure compliance with qualitative DNSH and minimum safeguards are recommended to be followed for the due diligence process.

Step 5 – Calculate the alignment of investment with the Taxonomy and prepare disclosure at the investment product level

Once the previous steps have been completed and the aligned portions of the companies in the portfolio have been identified, investors can calculate the alignment of their funds with the taxonomy (as an example, if 10% of a fund is invested in a company that makes 10% of its revenue from Taxonomy-aligned activities, the fund is 1% taxonomy-aligned for that investment, and so on).

Assessing a portfolio for Taxonomy alignment

Source: Taxonomy: Final report of the Technical Expert Group on Sustainable Finance (March 2020)

A great initiative has been the case studies around how to use the EU Taxonomy shared by PRI’s (Principle for Responsible Investment: The PRI is an investor initiative in partnership with UNEP Finance Initiative and UN Global Compact). Starting in late 2019, over 40 investment managers and asset owners worked to implement the Taxonomy on a voluntary basis in anticipation of upcoming European regulation.

Here is a summary of some of the cases studies:

For more details on these case studies and practical EU taxonomy implementation recommendations click here!

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