The Pakistan Credit Rating Agency Limited
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Maryam Arshad

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PACRA Maintains Entity Ratings of GuarantCo Limited

Rating Type Entity
(28-Dec-19 )
(28-Jun-19 )
Action Maintain Maintain
Long Term AAA AAA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

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. Support of the sponsors is evident from most recent injection of $ 2mln by Dutch ministry of foreign affairs (DGIS) through the PIDG in 2018. GuarantCo mainly operates in low income, below investment grade countries. Its objective is to facilitate flow of debt capital to projects having bearing on infrastructure and a positive long-term impact by offering credit guarantees. GuarantCo is cautiously building its guarantee portfolio with adequate emphasis on diversification: geographical, entity and sector.
The company’s portfolio is tilted to Africa, although GuarantCo is focusing to gain more exposure in Asia. Recently, enhanced portfolio in india is evident of the same. Good investment income is supplementing core business over the years. Profitability has witnessed remarkable growth and during 9MCY19, total profit for the period is reported as $ 13.79mln after few years of weak profitability. Strong profitability is attributable to remarkable fair value gain on financial guarantee contracts and fair value gain on financial instrument where significant mark to market gain in bond portfolio is witnessed during the period. Liquidity and capitalization indicators remained good. GuarantCo Management Company, a fully owned subsidiary of Cardano Development, is the fund manager responsible for GuarantCo's commercial operations. The contract has been assigned for relatively a longer period which is expected to help the management, to pursue a well-conceived strategy to achieve profitability in the near term. GuarantCo's ratings are dependent on its robust ownership structure. The Company's ability to achieve desired growth in its guarantee portfolio is important to pull off from bottom-line losses. Meanwhile, close monitoring of asset quality remains critical.

About the Entity
GuarantCo Limited was established in 2006. The company has executed fifty projects with exposure in seventeen countries to date. 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's five members BoD comprises all non-executive directors who are qualified professionals with emerging and frontier market experience. Mr. Lasitha Perera is the CEO and was previously the Chief Investment Officer of the Company and has been associated with GuarantCo since 2009. 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.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.