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. Support of the sponsors is evident from injections by Australian government’s Department of Foreign Affairs (DFAT) and callable capital from the UK. 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 remained weak over the last few years given GuarantCo issuing guarantees for loans and bonds in emerging markets. 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.
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 member 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.