PACRA Maintains 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). It is directly and indirectly owned by five highly rated sovereigns. The demonstration of support of the sponsors is evident from time to time in the form of injection of capital. In Apr-22, USD 16mln equity injection from FDCO was received. GuarantCo mainly operates in low income, below investment grade countries as per its mandate. As at end-Dec 21, the exposure stood in nineteen countries wherein, most of the exposure lies in corporate finance & project finance. There is increased focus towards Asia from Africa evident from enhanced portfolio in South Asian market. The emerging Asian market is representing above 50% of the portfolio. The current portfolio is skewed towards energy, transport, inputs for infrastructure, telecom and urban infrastructure sectors. Steady growth has been seen in the guarantee portfolio. Revenues subsided YoY, primarily due to an increase in provisions on fees from stressed assets. During CY21, GuarantCo financially closed 5 transactions and signed 6 recourse agreements. GuarantCo incurred net loss during CY21 due to reduction in fair value of an impaired asset, with a call on the guarantee highly probable. GuarantCo also reported net loss on investments on account of low returns on the investment portfolio and mark to market losses on the bond portfolio with PIMCO. Liquidity indicators remained in comfortable range where cash and cash equivalents recorded uptick.
GuarantCo Management Company, a fully owned subsidiary of Cardano Development, is the fund manager responsible for GuarantCo's commercial operations. 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 remains critical.
GuarantCo Limited was established in 2005. The ownership of GuarantCo lies with five governments – United Kingdom, Netherlands, Sweden, Switzerland, and Australia. With the exception of the Netherlands Development Finance Company (FMO), which contributes 11% of GuarantCo's total paid-in capital, the agencies act jointly under the umbrella of the Private Infrastructure Development Group (PIDG). GuarantCo also has stand-by debt facilities made available by non-shareholding sponsors such as the AfD and the government of Canada. GuarantCo's five members BoD comprises all non-executive directors who are qualified professionals with emerging and frontier market experience. Mr. Layth Al-Falaki (CRO at PIDG and Non-Executive Director on the Emerging Africa Infrastructure Fund’s boards) has recently been appointed as Chief Executive Officer of GuarantCo. He has had a long-standing career in banking and has in-depth experience of dealing in emerging markets, principally in Africa and Asia. Ms. Yukiko Omura is the chairperson of the board since 1st January 2018. Ms. Yukiko Omura carries three decades of experience in multilateral development agencies and leading investment banks.