Investing tools

FREDA provides equity investments , quasi-equity investments and subordinated debt.

If all pre-conditions are met, the company may be considered for an equity investment. In addition to equity, we may provide subordinated debt to help the company finance its working capital needs (subordinated debt can be only issued to the client companies, in which FREDA has previously invested in equity). If the company does not fully comply with all pre-conditions but is capable and committed to cover the compliance gap, it may be considered for a quasi-equity investment.

Limits for our investments

Financing instrument

FREDA’s percentage in the client company’s share capital

Minimum investment amount

Maximum investment  amount

Equity investment

25-45%

USD 100 000

USD 500 000

Subordinated debt

 

The total amount of the subordinated debt cannot exceed 50% of the amount of equity invested in the same company.

Quasi-equity investment

 

USD 100 000

USD 500 000

The Fund has the following floors and ceilings for its investment portfolio (excluding nonfinancial support):

  • total investment in a company (including equity, quasi-equity, and subordinated debt) may not exceed 45% of the company’s net assets after FREDA’s investment, defined as total assets less total liabilities excluding FREDA;
  • total investment in a company (including equity, quasi-equity, and subordinated debt) may not exceed 1/3 of the company’s assets after FREDA’s investment;
  • total equity investment (including the equity component of the quasi-equity investment) should be at least 40% of FREDA’s portfolio, while subordinated debt and the debt component of the quasi-equity investment cannot exceed 20% and 40% of FREDA’s portfolio, respectively.

Requirements for collateral

 Subordinated debts and quasi-equity investments are secured by collateral. The collateral must meet the following conditions:

  • the liquid value of the collateral should be at least 125% of the loan amount (i.e. the loan amount cannot exceed 80% of the liquid value of the collateral);
  • at least 80% of the loan amount must be secured by the real estate and/or fixed assets;
  • the liquid value of the collateral is subject to revaluation in case of sharp changes in the real estate market, but not less than once every 3 years;
  • if the collateral is already pledged for other loans, only the remaining liquid value, which is the total liquid value of the collateral less the total amount of respective liabilities (principal amounts, accrued interest, penalties, etc.) multiplied by a coefficient of 1.25, is taken into account.