GuarantCo’s A1 Stable rating affirmed by Moody’s in Periodic Review

Moody's Ratings (Moody's) has completed a periodic review of the ratings of GuarantCo Limited and other ratings that are associated with this issuer.

The review was conducted through a rating committee held on 23 May 2025 in which we reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), and recent developments.

Key Rating considerations and rationale are summarized below.

GuarantCo’s rating, including its A1 long-term issuer rating, reflects its very robust liquidity position and strong shareholder support as well as its moderate and rising leverage and the low credit quality of the borrowers under its guarantees. GuarantCo has not yet achieved a significant track-record of consistent profitability, but it continues to attract substantial funding from highly rated sponsors, which will support the planned growth of its business in the coming years.

GuarantCo posted a record high net profit of $5.3 million in 2024 after substantial losses in 2021 and 2022 due to large guarantee calls. Shareholders have consistently provided additional equity with $22.7 million in equity injections in 2024 and the business plan forecasts new equity of $15 million in 2025, followed by $10 million in each of the subsequent two years. The UK’s (Aa3 stable) strong historical relationship with the entity underpins our view that the UK, as the largest shareholder, will continue to provide additional capital to GuarantCo, even as the UK government is reviewing its development aid budget.

GuarantCo is continuing to increase the revenue-generating, active share of the portfolio with the total amount of active guarantees rising to $855 million in 2024. GuarantCo closed 8 transaction in 2024, slightly down from 2023, which reflects a more discerning approach to new transactions as GuarantCo’s risk management matures. GuarantCo also agreed a new $50 million liquidity revolving facility in 2025, which provides a timely funding buffer and increased flexibility to help GuarantCo grow its operations in line with the business plan. Despite the challenging environment in which GuarantCo operates, the performing share of the portfolio stood at 72% in 2024 and we expect asset performance to continue to improve.

GuarantCo’s capital adequacy at “ba1” reflects its moderate and rising leverage ratio as its portfolio continues to grow, the relatively low credit quality of its portfolio given its focus on the private sector in frontier and emerging markets, as well as a gradually improving asset performance. Very strong liquidity buffers and a conservative liquidity management strategy underpin our assessment of GuarantCo’s liquidity and funding position at “a1”. We assess the strength of GuarantCo’s member support as “High”, which provides a two-notch uplift from the entity’s intrinsic financial strength score of “baa1”. The strong ability of GuarantCo’s shareholders to provide support is based on its very strong weighted average shareholder rating. The callable capital cushion has increased significantly since 2020 and also benefits from uplift due to a strong enforcement mechanism.

The stable outlook reflects our expectation that shareholders will continue to provide financial support to GuarantCo’s growing operations, which mitigates the credit impact of gradually rising leverage. Also, the low credit quality of GuarantCo’s portfolio of guarantees is partly mitigated by a counter-guarantee from the Swedish International Development Cooperation Agency (Sida), the government of Sweden’s (Aaa stable) development finance agency. We expect asset performance will continue to improve, helped by the growing portfolio and recoveries of called guarantees. Furthermore, the stable outlook captures GuarantCo’s very solid liquidity buffer and prudent liquidity policies, which will continue to support GuarantCo’s intrinsic financial strength.

Upward rating pressure could emerge if shareholders continued to provide more paid-in equity, thus reducing GuarantCo’s leverage. Positive rating momentum would also emerge if the company managed to become profitable on a sustained basis, which in turn would allow it to fund part of its portfolio growth out of retained earnings.

The rating would come under downward pressure in a scenario of significantly higher guarantee calls that would erode capital with no remedial action taken by the company or its shareholders. Much higher leverage without any further risk mitigants, or signs of waning shareholder support which we consider to be unlikely would also exert downward rating pressure.

This document summarizes our view as of the publication date and will not be updated until the next periodic review announcement, which will incorporate material changes in credit circumstances (if any) during the intervening period.

The principal methodology used for this review was Multilateral Development Banks and Other Supranational Entities published in February 2024. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.

This announcement applies only to EU rated, UK rated, EU endorsed and UK endorsed ratings. Non-EU rated, non-UK rated, non-EU endorsed and non-UK endorsed ratings may be referenced herein to the extent necessary, if they are part of the same organization list.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the issuer/deal page on https://ratings.moodys.com for the most updated credit rating action information and rating history.