The Factory is a project finance mechanism for investment projects in Russia’s priority industries. The mechanism allows borrowers to obtain funding under syndicated loan (credit) agreements and raise more funds to deliver
Tools to promote projects delivered through the Factory
- VEB.RF’s administrative and financial support
- Borrowers and lenders’ interest risk hedging using the Russian government subsidies
- The Russian government targeted guarantee to reduce financing costs and mitigate risks of investors in bonds issued to finance the Factory projects
- Special procedure for calculating Russian credit institutions’ capital adequacy ratio and creating provisions for loans and credits granted through the Factory
Factory Organization Model
VEB.RF
- Factory operator
- Selects Factory’s projects
- Syndicate loan manager
- Recipient of the government subsidy
Economy Ministry
- Factory supervisor
- Chief manager of the government subsidy
PFF SPV
- Wholly owned by VEB.RF
- Issuer of government-backed bonds
- Tranche A Lender
- VEB.RF commitment to buy out/substitute SPV’s distressed assets
Ministry of Finance
- Issuer of a government guarantee and grantor of the subsidy
Factory Participants
- Lenders: Commercial banks and global financial institutions
- Project initiators
- Direct Investment Funds
Central Bank
- A special procedure to govern commercial banks relating to Factory project lending
Project Selection Criteria
Above RUB 3 bn
Project in the Russian Federation
Up to 20 years payback period
Areas and industries pursuant to VEB.RF Strategy
≥20% sponsor’s equity investment
Borrower - project company