National Community Capital Association & Providian Financial
PHILADELPHIA, Aug. 15 /PRNewswire/ -- Finding quality, affordable
childcare is one of the greatest challenges facing working families today. As
childcare expert Trinita Logue of the Illinois Facilities fund observed,
"Despite the wide recognition of childcare as a valued service for parents and
children, the field faces a constant lack of adequate resources to meet
demand."
Recognizing the childcare crisis in America's most distressed communities,
National Community Capital Association (NCCA) and Providian Financial
Corporation are teaming up to dramatically increase the availability of
quality, affordable childcare spaces through a new effort called the National
Partnership for Childcare Finance.
Working through its national network of Community Development Financial
Institutions, NCCA intends to leverage the financing embodied in this
partnership to raise at least $25 million over the next five years to finance
childcare facilities and operations, providing childcare for nearly
16,000 children. In the last three years, NCCA's network of CDFIs has
provided more than $16 million for childcare financing. In 1999 alone, NCCA
members made 93 loans to childcare facilities, creating 6,313 childcare slots.
Providian Financial is providing the seed funds for the project with
nearly $12 million in investments and grants that will allow childcare
providers to obtain the financing they need to open new centers or expand or
rehabilitate existing centers. According to Mark Pinsky, President and CEO of
NCCA, "This is the most ambitious and innovative childcare investment of this
type by a financial institution." This unique and unprecedented partnership
will help tens of thousands of kids and their families who live and work in
some of the nation's most distressed communities.
What the Partnership will do:
-- Make funds available to childcare providers. Childcare is a business
that cannot exist, much less prosper and grow, without unconventional
financing assistance. "Part of the facilities crisis in
community-based family and child services is caused by the lack of
capital to invest in physical improvement and capital purchases," said
Carl Sussman of the Finance Project. Childcare providers need small,
low cost loans. Because of the extra risk and limited financial return
for lenders with these loans, it is generally very difficult to obtain
financing from most traditional financial institutions.
-- Create the infrastructure that will enable future loans. The
innovative financing options and technical assistance in this
partnership will create a solid infrastructure that will enable other
financial institutions to make similar commitments without encountering
some of the traditional capacity building and start-up roadblocks
natural to an emerging area of development finance. "Equally important
as providing loans to childcare facilities is providing technical
assistance to help providers qualify for loans and use the loans
effectively to manage child care and development facilities and
increase the quality of childcare," said Melinda Green of the National
Black Child Development Institute.
How the Partnership will work:
Providian has made a nearly $12 million commitment to National Community
Capital to seed the Partnership. Providian's financing will take the
following forms:
-- $9.5 million in Equity Equivalent investments (EQ2s) in National
Community Capital which will re-lend to Community Development Financial
Institutions (CDFIs) in the form of long-term, low-cost senior debt.
CDFIs raise capital at below market rates and re-lend to businesses and
housing developers in low-income communities throughout the country.
CDFIs are a leading source of financing for businesses and housing
developers in distressed communities, serving as bridges linking
unconventional borrowers to conventional lenders.
Developed in 1996 by NCCA, an EQ2 is a deeply subordinated loan with
certain equity-like features including a rolling term. The EQ2 expands
the CDFI's capital base, which determines how much it can borrow from
other sources. Thus, the loan will function somewhat like new equity
by being a stable, long-term source of financial support. More than
$5 million of childcare financing packages to 11 CDFIs are now in
process through the Partnership. The first financing packages will be
approved in August 2001 and the initial $5 million in loans should be
completed by the end of 2001.
-- $1.9 million in grants over three years that NCCA will pass through to
childcare financing CDFIs for use as equity, childcare project equity
or financing rate buydown for childcare lending. Equity strengthens a
CDFI's capital base, enhancing its ability to attract additional debt
capital.
-- $300,000 in grants that NCCA is distributing to CDFIs starting
childcare financing activity or developing new products or markets.
These grants will support market research, product research and
development or other one-time expenses. Thirteen initial grants were
announced in August 2001
-- $290,000 in grants over three years to National Community Capital to
create the infrastructure for this partnership and encourage and enable
similar partnerships in the future. This grant will enable NCCA to
supply needed technical assistance to CDFIs engaged in childcare
financing or developing childcare loan programs.
SOURCE Providian Financial Corporation
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Related links:
http://www.providian.com
CONTACT:
Mark Pinsky of National Community Capital
Association, +1-215-923-4754, ext. 204; or Ashley Vanarsdall of
Weber Shandwick Worldwide, +1-202-585-2130, or
avanarsdall@webershandwick.com
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