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Products and benefits

GuarantCo provides local currency contingent credit solutions, primarily guarantees, to support projects and companies in order to raise debt financing for the development of infrastructure in lower income countries in Africa and Asia thereby assisting with the alleviation of poverty.

GuarantCo seeks to bridge the gap between the financial requirements of a project or corporate and the financial terms available from the market. Often projects may find it challenging to obtain debt finance in sufficient quantum or of a sufficient tenor, whether due to certain specific risks or market constraints. This can often be overcome through the use of an appropriately structured guarantee, particularly one that transfers risk rather than just acts as a mitigant. Such guarantees can be used to enable direct lending from banks/financial institutions or capital market issuances.

To meet the specific requirements of a particular financing, GuarantCo’s products are deliberately flexible rather than a standard form that may, or may not, be appropriate. GuarantCo’s business model has been structured to allow for risk transfer through its products rather than following a model more typical of an insurance company which offers risk mitigation rather than risk transfer. GuarantCo can provide a variety of contingent products as may be required for a particular project including: partial credit and partial risk guarantees, first loss guarantees, tenor extension or liquidity guarantees and can provide joint guarantees or counter guarantees.

The portfolio demonstrates the flexible nature of GuarantCo’s products.

Guarantee examples

Products and Benefits - Load Diagram

Guarantee over local currency loan

Typically, this structure will involve a partial credit guarantee provided by GuarantCo (in collaboration with other guarantors if required) to the beneficiary or the provider of the debt. This guarantee will cover the non-payment of scheduled debt service of the underlying loan between the beneficiary and the borrower up to the limit of the guarantee. A recourse agreement will be required between the borrower and GuarantCo to cover, amongst other provisions, the payment of fees to GuarantCo and the rights and obligations among the borrower, GuarantCo and the beneficiary following a potential call under the guarantee.

Products and Benefits - Bond Diagram

Guarantee over local currency bond

A guarantee over a local currency bond will involve a similar structure to a guarantee over a local currency loan except that the beneficiary will usually be the note trustee acting on behalf of all of the noteholders.

Guarantee benefits

Financier

  1. Risk transfer (instead of risk mitigation) counterparty risk to AA- / A1 entity.
  2. Efficient capital treatment for long dated transactions.
  3. Build capacity in sustainable long-term finance using myriad types of financing solutions.

Borrower/Issuer

  1. Positive signaling.
  2. Access new proof of capital (e.g local currency loans and bond markets).
  3. Enhance overall return on investments.

Suppliers (EPC, equipment etc.)

  1. Offer more flexible terms.
  2. Opportunity to accelerate mobilising of projects whilst capital is being finalised.
  3. Risk mitigation counterparty risk in event financing is extended.