BFP and VCs in conflict over bazooka funds
Portugal’s development bank Banco de Fomento has banned venture capital companies from buying company shareholdings on the back of the Programa Consolidar (Consolidate Programme – one of the bank’s new financial instruments from the Capitalisation and Resilience Fund).
The bank says this is because these are not investments in destination beneficiaries, meaning the companies. Rather they would be funds used to buy all or a controlling share in beneficiary companies.
The Portuguese Association of Venture Capital (A Associação Portuguesa de Capital de Risco (APCRI) says that it will contest the decision, but the Banco de Fomento told the online news source ECO that there has been an investment requirement in companies from the very beginning.
“The reality of the requirement for investments in (final beneficiaries) companies has always been part of the (funding) distribution agreements shared by the BFP with management companies, and inclusively includes a clause the requires the refunding of sums not made available to end beneficiaries”, said a source at the development bank led by Ana Carvalho and Celeste Hagatong.
The Banco de Fomento sent out a letter to 15 venture capital companies involved in the Consolidate Programme to clarify the rules for accessing sums from the Capitalisation and Resilience Fund in which it is specified that buyout operations imply the acquisition of a controlling share, which therefore means that the amount is not being invested in the end beneficiary”.
In other words, according to the BPF, the rules make clear that “indirect investment (made through funds from funds) should be made wholly in the end beneficiary “using own capital instruments or quasi-equity”.
The Banco Fomento says that the purchase of shareholdings may be made on the back of the Consolidate programme if they are financed by private funds, but funds from the Capitalisation and Resilience Fund may not for legal reasons be used to finance the purchase of a controlling stake in a beneficiary company.
Photo: Lusa.
