EBRD Leverages China Ties for Debut Equity Fund
The European Bank for Reconstruction and Development said on Monday it was setting up its first equity participation fund and had secured Chinese and Azerbaijani state funds as cornerstone investors.
The EBRD said a 350 million euro ($390 million) first financing round had been completed for the private equity-style fund, which will give institutional investors a 20-30 percent "economic interest" in companies the EBRD takes stakes in.
"China's State Administration of Foreign Exchange (SAFE) and the State Oil Fund of Azerbaijan (SOFAZ) are the cornerstone investors of the EPF (equity participation fund)," the EBRD said in a statement.
"Further institutional investors will be able to join the fund in the coming months until final closing."
Azerbaijan said it was putting in 100 million euros of the total, which leaves China providing the remaining 250 million euros.
The new fund will give investors an "equity return swap" whenever the London-based development bank takes an equity stake of more than 10 million euros in a company.
The EBRD will remain the owner of those equity stakes, but the swap will mean the investors get 20-30 percent of any gains or dividends made from the stakes, or share 20-30 percent of any losses.
The Chinese and Azerbaijan funds and any other joiners will also able to sell the swaps back to the EBRD at their then-market value, if the stakes have not been sold at the end of the fund's five-year planned lifetime.
Set up by governments in 1991 to support the ex-communist states of eastern Europe, the EBRD has expanded its mandate in recent years to parts of North Africa and central Asia and -- last year --to Greece.
By Marc Jones
