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The first option will provide partial risk protection certificates to newly issued sovereign bonds of a euro area Member State.
Under the partial risk protection, ESBPF would provide a partial risk protection certificate to a newly issued bond of a Member State. The certificate could be detached after initial issue and could be traded separately. It would give the holder an amount of fixed credit protection of 20-30 per cent of the principal amount of the sovereign bond. The partial risk protection is to be used primarily under precautionary programmes and is aimed at increasing demand for new issues of Member States and lowering funding costs.
Klaus Regling, CEO of EFSF, stated: “Following discussions with investors worldwide, we have encountered broad interest and willingness to acquire partial risk protection certificates issued by ESBPF. However, even though the ESBPF is now ready, it will only be activated following a request by a euro area Member State.”
ESBPF is a company incorporated on 5 January 2012 in Luxembourg as a société anonyme.
The second option for leveraging the resources of the EFSF is a Co-Investment Fund which would allow the combination of public and private funding. The Co-Investment Fund would purchase bonds in the primary and secondary markets and would comprise a first loss tranche which would be financed by EFSF.
This option will be ready for deployment shortly and will also only be activated following a request by a Member State.