PACRA Maintains Entity Ratings of GuarantCo Limited - Press Release issued by The Pakistan Credit Rating Agency Limited.

Lahore -- July 01, 2020 (PPI-OT)

Following is the text of press release issued by The Pakistan Credit Rating Agency Limited (PACRA)

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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 time to time in the form of injection of capital. GuarantCo mainly operates in low income, below investment grade countries as per its mandate. GuarantCo is aggressively building its guarantee portfolio which poses significant concerns while keeping stagnant equity base, resulting in increased leveraging of 2.24x during CY19, however remains within the cap of 3x approved by PIDG. Furthermore, it is also learnt that company intends to enhance its callable capital. Covid-19 has posed challenges to almost all segments of the economy; worldwide and domestically ratings are getting negatively impacted. The ramifications would continue to unfold, warranting vigilance and timely actions where needed.

The company's portfolio is tilted to South Asia, although GuarantCo is focusing to increase more exposure in E and S Africa, where asset quality remains major concern as pressures are building up in key markets due to COVID-19 pandemic. Over the recent years, enhanced exposure in India is evident of the same. Good investment income is...