PACRA Maintains the Entity Ratings of GuarantCo Limited

GuarantCo Limited, an international Joint Venture development financial institution, is the local currency guarantee arm of the Private Infrastructure Development Group (PIDG). The company was established to mobilize investment for infrastructure projects and to support the development of local capital markets. The support from GuarantCo's shareholders, which include five highly rated sovereigns through the Private Infrastructure Development Group (PIDG) Trust, has significantly contributed to the assigned rating. During CY24, Global Affairs Canada became the new member of the PIDG group which further strengthened the ownership profile. Guarantco’s solid liquidity buffer and high development impact bode well for the rating. The rating also signifies sustained confidence in GuarantCo's financial stability and strategic initiatives, bolstered by investments from several international funding agencies. The company aims to develop local capital markets by providing credit solutions to finance infrastructure projects to boost economic growth. GuarantCo Management Company (GMC), a fully owned subsidiary of Cardano Development (CD), is the fund manager responsible for GuarantCo's commercial operations comprising execution and management of investment portfolio. CD incubates innovative financial risk management products that develop local financial markets in emerging and frontier economies. GuarantCo mainly operates in low-income, below-investment-grade countries as per its mandate with a vision to assist in the alleviation of poverty. In pursuit of its vision, in 2013, the company entered the Pakistani market with its guarantee business. It has provided guarantees in various domains, including energy, oil distribution, digital communication infrastructure, and multiple other sectors. Following its success in Pakistan, the company, with support from PIDG, developed InfraZamin Pakistan (IZP) as a successor to its guarantee business in Pakistan. IZP is a local credit guarantee institution that has been rated ‘AAA’ by PACRA. The successful maturity of business deals indicates the efficient risk management of the company. Asset quality remains a concern as pressures are building up in key markets as Pakistan has been hit by a series of unique challenges, including inflation, and economic slowdown. However, the economy has started reflecting signs of recovery which adds comfort to ratings. During CY23, GuarantCo registered an increase in guarantee income and investment income. Consequently, the company recorded a profit in the full year. Apart from this, liquidity indicators also remained in a good range.
GuarantCo's ratings are dependent on its robust ownership structure & strong liquidity buffer. Prudent expansion and close monitoring of asset quality and internal obligor rating remain critical.

About the Entity
GuarantCo Limited was established in 2005. The ownership of GuarantCo lies with the governments of the United Kingdom, Netherlands, Sweden, Switzerland, and Australia. Except for the Netherlands Development Finance Company (FMO), which contributes 10% of GuarantCo's total paid-in capital, the agencies act jointly under the umbrella of the PIDG. GuarantCo also has stand-by debt facilities made available by non-shareholding sponsors such as the AFD and the government of Canada. Mr. Layth Al-Falaki (CRO at PIDG and Non-Executive Director on the Emerging Africa Infrastructure Fund’s boards) is the CEO of GuarantCo. Mr. Falaki assumed his office during CY22. The entire reporting line of GuarantCo terminates into CEO. The entire management team consists of seven Executive Officers, who carry extensive experience which bodes well for the risk profile of the company.