CELTEL KENYA
KES 725 million partial credit guarantee to credit enhance a local bond issue as part of a larger financing package for the second mobile telecommunications provider in Kenya.
Transaction Overview
Date: December 2005 Country: Kenya Developmental Benefit
GuarantCo Guaranteed Amount: Kenya Shillings (KES) 725 million (USD 12 million) Celtel Kenya needed to restructure its balance sheet by exchanging costly Total Transaction size: KES 3.5 billion foreign currency shareholder loans with local currency debt. This allowed the Financing Partners: FMO, DEG company to run a more capital-efficient and competitive business and expand its GuarantCo Additionality: network. This helped to reduce tariffs, thus making mobile services affordable to As part of its initiative to maximise local currency financing, Celtel Kenya sought to raise Kenyan Shilling a greater proportion of the population. debt from the local capital market. However, in order to place debt in the local capital market, Celtel Kenya needed to obtain credit enhancement from an AAA-rated institution. GuarantCo’s involvement enabled FMO to arrange and underwrite the required credit enhancement for the debt issuance.
The facility provided a major boost to the Kenyan capital market due to the demonstration effect of a private sector non-financial institution’s successful bond listing. ALAF LIMITED
TZS 6.5 billion partial credit guarantee made available to provide credit enhancement for a bond issue to finance the expansion of a steel plant in Tanzania
Transaction Overview
Date: June 2007 Country: Tanzania Developmental Benefit
GuarantCo Guaranteed Amount: Tanzania Shillings (TZS) 6.5 billion (USD 5.1 million) The Safal group is one of the biggest producers of steel roofing in Africa, widely Total Project Cost: TZS 37.3 billion used in affordable housing. The proposed investment in their Tanzanian plant Financing Partner: IFC introduced new and more affordable product lines, besides improving quality of GuarantCo Additionality: existing production, thus providing access to better quality housing products to low The Safal Group proposed to partly fund its proposed new product line in Tanzania by local currency and middle income households. bonds, but needed credit enhancement to be able to access the local capital market. GuarantCo and IFC’s guarantee, covering 75% of the bond amount, was critical for Safal to begin the process of issuing the bonds.
The guarantee was agreed by IFC and GuarantCo in 2007 but was not in the end required as Alaf eventually managed to access the bond market without credit enhancement in 2009. However, the availability of the guarantee played an important role in catalysing the investment 2 years earlier than would have otherwise been possible as Safal was prepared to inject its equity portion up front knowing the debt portion was secure. It is a feature of GCo’s support that no early penalties are charged for cancellation, thus encouraging clients to graduate to purely commercial finance at the earliest opportunity. MABATI ROLLING MILLS
KES 750 million partial credit guarantee made available to provide credit enhancement for a bond issue to finance the expansion of a steel plant in Kenya
Transaction Overview
Date: June 2007 Country: Kenya Developmental Benefit
GuarantCo Guaranteed Amount: Kenyan Shillings (KES) 750 million (USD 9.7 million) The Safal group is one of the biggest producers of steel roofing in Africa, widely Total Project Cost: KES 3 billion used in affordable housing. MRM is their flagship operation in E Africa. Demand for Financing Partners: IFC steel roofing has been growing, in line with the rapid growth in housing activity in GuarantCo Additionality: the region. The new capacity at Safal’s Kenya plant will enable them to meet the The Safal Group proposed to partly fund its proposed plant capacity expansion in Kenya by local currency growing demand while continually bonds, but needed credit enhancement to be able to access the local capital market. GuarantCo and IFC’s improving product quality. guarantee, covering 75% of the bond amount, was critical for Safal to begin the process of issuing the bonds.
The availability of the guarantee in 2007, while not eventually required, played an important role in catalysing the investment 18 months earlier than would have otherwise been possible. Safal’s access to Kenya’s domestic capital market without a guarantee, a significant and welcome sign of increased market sophistication, was facilitated by GuarantCo and IFC’s timely support. GuarantCo was then able to recycle its capacity for other projects in the region. CELTEL CHAD
XAF 3.5 billion partial credit guarantee for Afriland Bank to provide additional lending to the leading mobile telecommunications provider in Chad
Transaction Overview Developmental Benefit Date: October 2007 Country: Chad The link between mobile phone use and GuarantCo Guaranteed Amount: CFA Franc (XAF) 3.5 billion (USD 8 million) development has been widely documented, particularly in Africa. The Total Transaction size: XAF 14.8 billion further network expansion, partially financed by the GuarantCo covered loan, Beneficiaries & Financing Partners: Afriland First Bank, FMO has helped expand the network into more rural areas. Celtel Chad leads the way in GuarantCo Additionality: expanding the mobile network, so for many areas this will be the first time they In line with Celtel policy to increase local currency financing, Celtel Chad sought additional CFA financing have had access to a mobile services. In for capital expenditure and to refinance USD shareholder loans. The joint guarantee by FMO and addition, the ability to roam over a larger GuarantCo enabled Afriland First Bank to increase its loan beyond its normal lending cap to meet Celtel proportion of the country is particularly Chad’s full debt requirements. useful for Chad as it has a significant nomadic population. SHRIRAM I
INR 900 million partial credit guarantee of the mezzanine tranche of a truck finance receivables securitisation in India
Transaction Overview Developmental Benefit
Date: December 2008 Country: India Shriram finances small truck owner- operators who would otherwise have to GuarantCo Guaranteed Amount: INR 900m (USD 19 million) borrow from unlicensed money lenders. The finance enables thousands of poor Total Transaction Size: INR 21 billion truck drivers to purchase their own vehicles rather than remaining Beneficiaries & Financing Partners: Deutsche Bank, FMO employees.
GuarantCo Additionality: The mezzanine guarantee was a product not available from Indian investors. This Deutsche were seeking to syndicate an INR 2,036 million mezzanine tranche in a securitisation of truck intervention enabled a much larger capital finance receivables but were struggling as there was no investor appetite for mezzanine debt in India. markets transaction to be completed GuarantCo, in collaboration with FMO, was able to guarantee the mezzanine tranche thereby enabling the without which Shriram would have successful securitisation. reduced its support to the sector.
GuarantCo and FMO’s facility helped demonstrate the commercial viability of mezzanine guarantees in the The Shriram group is one of the corporate nascent Indian securitisation market and today Shriram is able to get such guarantees from private sector leaders in HIV awareness and reduction banks. GuarantCo and FMO’s intervention helped this transition to more sophisticated financial products, programmes. The Shriram Transport thus building additional capacity in the local capital markets business is essential to the programmes, as the company has unrivalled access to truck drivers to run health and education programs. WATANIYA PALESTINE TELECOM
USD 10 million partial risk guarantee of two Palestinian banks lending to a start-up mobile telecommunications operator in the Palestinian Territories
Transaction Overview Developmental Benefit Date: January 2009 Region: Palestinian Territories, West Bank Mobile phone penetration in Gaza and the GuarantCo Guaranteed Amount: USD 10 million West Bank was a relatively low 29% in 2008 as the service was poor. WPT has Total Project cost: USD 145 million introduced high quality communications services at affordable prices. Increased Beneficiaries & Financing Partners: Bank of Palestine, Commercial Bank of Palestine competition is expected to lead to lower tariffs and reliable services for consumers GuarantCo Additionality: which will reduce the cost of doing business in all sectors. Given the By providing a guarantee, GuarantCo enabled Wataniya Palestinian Telecom (“WPT”) to access USD 25m restrictions on movement for Palestinians, of financing from two local banks, the Bank of Palestine and Commercial Bank of Palestine. WPT was good mobile telecommunications are keen to involve as much financial support from the Palestinian banking sector as possible. BoP and CBoP even more critical for social and economic have substantial USD deposits (Palestine doesn’t have its own currency) and were enthusiastic to support development than elsewhere. this major investment. However local bank regulations limited the amount they could lend without a guarantee. Offshore financing also came from overseas lenders including IFC, Standard Bank and The single largest private sector Ericsson Credit (the latter two partially guaranteed by EKN, the export credit agency of Sweden) investment in Palestine, WPT will demonstrate to other investors that the investment climate has improved and that other infrastructure projects are possible. CALCOM CEMENT
INR 1,120 million partial credit guarantee of two Indian banks’ lending to a new cement plant in Assam, India.
Transaction Overview
Date: September 2009 Country: India Developmental Benefit
GuarantCo Guaranteed Amount: INR 1,120million (USD 25 million) The project will create the largest cement production facility in the North-East region Total Project Cost: INR 4,076 million of India which suffers from a chronic cement production deficit. It will help bring Beneficiaries & Financing Partners: HDFC Bank, Axis Bank, Cordiant Capital down the abnormally high cement prices in the region by reducing the substantial GuarantCo Additionality: cost of freight that suppliers currently bear for cement brought in from mainland Although the economic and security situation in the north-east region of India has vastly improved in the India. recent past, Indian banks are still cautious lending to projects in the region. HDFC Bank, the lead arranger, was struggling with syndication of the project debt. GuarantCo’s guarantee enabled the additional It is also the largest single private sector financing required for the project to achieve financial close. infrastructure investment in the North East. Besides providing employment and The amount required was above GuarantCo’s normal maximum exposure so INR 480m of the total INR increasing economic activity in the 1,120m was syndicated by GuarantCo to Cordiant Capital, a Montreal based Emerging Market fund troubled region, the project will support manager, thus leveraging in further private sector support. other infrastructure projects such as housing, roads and hydropower thereby multiplying the developmental benefit. ACKRUTI CITY LIMITED
INR 940 million partial credit guarantee for lending to several slum redevelopment projects in Mumbai, India.
Transaction Overview
Date: November 2009 Country: India Developmental Benefit
GuarantCo Guaranteed Amount: INR 940 million (out of initial financing of INR3.9 bn) Nearly half of Mumbai’s 15 million inhabitants live in slums. They have Total Project Cost : INR 55 billion limited access to basic amenities like clean water and sanitation and have no Beneficiaries & Financing Partners: Deutsche Bank, FMO, Cordiant Capital, ICF Debt Pool security of tenure.
GuarantCo Additionality: GuarantCo’s support is helping to re- house up to 30,000 families in small but This 5 year project financing facility provides Ackruti City Limited with early stage funding that was not permanent flats with access to clean available from other sources. Most slums exist illegally on municipal land and thus banks approached by water, sanitation, electricity and clear slum dwellers and developers are not able to receive pledge of the land as security. The process of legal title. This will greatly improve living acquiring ownership rights over the land is lengthy and not without risk. Ambiguity in the application of conditions and the life chances of children local regulations prohibiting acquisition of land further adds to the local banks discomfort. in particular. Unlike many schemes, the initiative is voluntary and community led. Frontier Markets Fund Managers played an active role in structuring the financing and GuarantCo’s partial credit guarantee enabled the facility to be increased by over 40%, thus helping it achieve critical size. Such is the high value of land in Mumbai that developers are prepared to provide free, quality housing on the same site to slum communities, in exchange for permission to develop & sell part of the freed up land. SHRIRAM II
INR 916m million partial credit guarantee of Tier II capital raising by Shriram
Transaction Overview
Date: September 2010 Country: India Developmental Benefit
GuarantCo Guaranteed Amount: INR 916 million (USD 20 million) Shriram finances small truck owner- operators who would otherwise have to Total Transaction Size: INR 2,250 million borrow from unlicensed money lenders. The finance enables thousands of poor Beneficiaries & Financing Partners: Deutsche Bank, FMO truck drivers to purchase their own vehicles rather than remaining employees. GuarantCo Additionality: Shriram’s core business of commercial Shriram needs to continually raise additional capital in line with the rising demand for its truck loans. vehicle finance continues its strong growth. Deutsche Bank were seeking to syndicate INR 2,500 million of Tier II capital to allow Shriram to expand Shriram is also now seeking to expand its their financing operations. Such capital issues compete with higher yielding assets for scarce capital in products to finance other small India, making obtaining reasonably priced capital funds a challenge infrastructure equipment servicing India’s growing infrastructure requirements. GuarantCo and FMO’s participation enabled Shriram to raise the capital at affordable rates which can be used to leverage much larger borrowings from commercial lenders SOUTH AFRICAN FINANCE COMPANY
ZAR 139 million partial credit guarantee of the senior tranche of the Company’s loan program 1
Transaction Overview
Date: September 2010 Country: South Africa Developmental Benefit G’tCo Guaranteed Amount: ZAR 139 million (USD 20 million) The Company helps to finance a critical Total Transaction Size: ZAR 760 million sector that employs and is utilised by the majority of South Africans. The Company Beneficiaries & Financing Partners: FMO, ICF Debt Pool and Investec Asset Management has provided seed capital to at least 20,000 broad based black SMMEs (all of GuarantCo Additionality: whom are previously disadvantaged individuals). An initial ZAR 760 million of a larger debt raising program was placed with commercial lenders and the DFI community. FMO were joint lead arrangers for the facility, which included ZAR 635 million of senior loans, with participations from GuarantCo, FMO and ICF, and a further ZAR 125 million of mezzanine financing provided by Investec Asset Management.
South Africa, being an upper middle income country, would not normally qualify for support from GuarantCo. However, given the pro-poor nature of the financing and the company’s inability to access the local markets following the financial crisis, GCo obtained special approval from its shareholders to support the financing
1 – Due to confidentiality reasons, certain details of this transaction have been withheld HOME FINANCE GUARANTORS AFRICA
USD 5 million Stop-Loss Insurance for HFGA, who will reinsure Collateral Replacement Indemnities that facilitate access to home loans by low and lower middle income households
Transaction Overview
Date: September 2010 Country: Ghana, Kenya, Rwanda, Uganda and Malawi Developmental Benefit
G’tCo Guaranteed Amount: USD 5 million equivalent in local currencies Access to affordable home loans is a major obstacle to economic Total Project Cost : N/A development for most low and lower middle income families in developing Beneficiaries & Financing Partners: HFGA, Home Loan Guarantee Company (HLGC), various local countries. Many families are unable to insurance companies buy or improve a home because of limited access to finance . There is GuarantCo Additionality: lender reluctance to enter this market due to the inability of borrowers to HFGA is introducing innovative home loan protection products to new markets in conjunction with local provide sufficient down-payments and insurance companies in order to stimulate local banks to widen access to finance. HLGC, who has set up resulting perceived default risk. HFGA based on their successful South African model, is a not for profit social enterprise and has not At the same time, few developers accumulated sufficient reserves to fully capitalise HFGA. HFGA therefore faced difficulty meeting regulators’ choose to build low cost housing minimum capital requirements without backing from GuarantCo. Given the pioneering nature of HFGA’s because there is no prospect of work, such backing is not available from either commercial insurers or even dfi’s. The initial USD 5m facility potential buyers raising finance. may be increased depending on demand. HLGC’s business model has worked Additional technical assistance funds are being used for a capacity building programme with local insurers well in South Africa for 20 years and and banks and to help provide financial literacy training for borrowers. An output based aid programme is HFGA, with GCo’s help, aims to also being considered that will provide targeted subsidies to make Collateral Replacement Indemnities replicate this success in sub Saharan affordable to the lowest income quartile of households. Africa. SPENCON
USD 15 million performance bond guarantee facility for a local east African construction company
Transaction Overview
Date: October 2010 Country: Uganda, Kenya, Tanzania Developmental Benefit G’tCo Guaranteed Amount: USD 15 million equivalent in local currencies Performance Bonds are a prerequisite for Total Transaction size : USD 30 million equivalent in local currencies carrying out any construction project in Africa and they are the most significant financial Beneficiaries & Financing Partners: Standard Chartered Bank bottleneck for the company. Large construction contracts, often donor funded, are regularly GuarantCo Additionality: awarded to international construction companies, at 15 – 25% higher prices, because Spencon is a mid sized local civil works contractor headquartered in Nairobi specialising in the water, local companies cannot furnish the full roads and power sectors. They were having trouble obtaining additional performance bond lines from performance bonds required. their banks in order to bid for and execute projects in East Africa. Standard Chartered, their main banker, was unable to provide the full requirement of USD 30 million, largely due to bank regulations on GuarantCo’s facility will help lower the cost of single obligor limits. GuarantCo’s guarantee made it possible for Standard Chartered to offer the full infrastructure in the target countries by enabling additional facility required. greater competition and local private sector participation. There will be continued expansion and employment for over 800 permanent Spencon staff and over 3,700 semi skilled personnel across East Africa. KUMAR URBAN DEVELOPMENT LTD
INR 920 million partial credit guarantee to help finance the largest slum redevelopment project in Pune, India
Transaction Overview
Date: March 2011 Country: India Developmental Benefit GuarantCo Guaranteed Amount: INR 920 million (out of initial financing of INR 2.5bn) Like most major Indian cities, a large Total Project Cost : INR 24 bn proportion of Pune’s population lives in slums. They have no security of tenure and Beneficiaries & Financing Partners: Deutsche Bank, FMO have limited access to basic amenities like clean water and sanitation . GuarantCo Additionality: GuarantCo’s support is helping to re-house Following the success of the slum redevelopment scheme in Mumbai, the state government decided to more than 5,000 families in small but extend the scheme to other cities in the state, including Pune, a neighbouring city of Mumbai. KUDL’s permanent flats. These are provided for free project is the first large scale slum redevelopment project under the scheme in Pune. on the same site by KUDL in anticipation of profits from development & sale of freed up Commercial slum redevelopment projects typically require only initial seed funding, after which they are land. The flats will have clean water, self financing from the stage payments made by buyers of the commercial property element. However, sanitation, electricity and clear legal title, local banks avoid this seed funding i) discouraged by central bank regulators from lending for property which will greatly improve living conditions development and ii) put off by the complex social and environmental issues involved with slum re- and the life chances of children in particular. housing. The absence of a track record of successfully implemented projects in Pune made it even tougher for the pioneering KUDL project to raise financing. Tenants are helped to set up housing societies to take over the running and Given the lack of funding, KUDL began implementation of the project from their own resources, maintenance of their new buildings with an completing only 10% of the project in the first 3 years. The 5 year project financing facility provided by endowment from KUDL. GuarantCo, DB & FMO will allow KUDL to complete the balance rehabilitation in the next 3 years TOWER ALUMINIUM GROUP LIMITED
Partial credit guarantees totalling NGN 2.21 billion to credit enhance the maiden bond issue of the largest manufacturer of aluminium roofing in West Africa
Transaction Overview
Date: September 2011 Country: Nigeria
G’tCo Guaranteed Amount: NGN 2.21 Billion (USD 14.7 million equivalent) Developmental Benefit
Total bond issue : NGN 4.63 Billion (Tranche A: NGN 3.63 Billion and Tranche B: NGN 1 Billion) GuarantCo’s support for Tower has had a strong demonstration effect, helping build Beneficiaries & Financing Partners: First Trustees Limited (on behalf of investors) further capacity in the embryonic Nigerian capital markets. It has also stretched the GuarantCo Additionality: tenor to 7 years from the typical 5 years for previous corporate bonds, which is a crucial In 2008 Tower Aluminium Group Limited (“Tower”), the largest manufacturer of aluminium roofing in West step toward meeting the requirements of Africa, financed a new factory with USD denominated bank loans. In late 2008, as the full impact of the future infrastructure related bond issues global financial crisis hit Nigeria, the Naira devalued by c 25% against the USD. Tower’s revenues are where longer tenor is essential. mostly in Naira and the impact of the devaluation was to significantly increase the cost of servicing its USD financial liabilities. The viability of the expanded business was thus impacted severely. Following a request for assistance, GuarantCo is also working with the Nigerian Tower recognised the need to diversify away from relying on the bank market and decided to refinance its Securities & Exchange Commission to set USD liabilities by issuing a 7 year Naira denominated corporate bond, thus enabling the company to also up training and mentoring of their staff. reduce its currency risk and extend the tenor of its debt. Tower was however unable to secure the “A” local rating required to be able to access local pension funds, key investors in the Nigerian corporate bond Tower produces aluminium roofing, a market. GuarantCo was able to use its local AAA rating in Nigeria to credit enhance Tower’s bond issue, component of low cost housing. It offers thereby making it eligible for pension fund investors. This was the first time such a structure had been advantages over steel roofing, lasting 5 used in Nigeria and there were many regulatory and procedural challenges which could not have been times longer, at prices affordable to low overcome without GuarantCo’s patient developmental approach. income families in Nigeria and other parts of West Africa KALANGALA INFRASTRUCTURE SERVICES
Joint partial credit guarantee totalling USD 2.2 million covering part of the financing for two new ferries, a road rehabilitation and certain water facilities for Bugala Island in Lake Victoria, Uganda
Transaction Overview
Date: December 2011 Country: Uganda
G’tCo Guaranteed Amount: USD 1.8 million Developmental Benefit
Total note issue : USD12 million (guaranteed tranche USD 5 million) The enhanced infrastructure is required in order to satisfy the growing and unmet Beneficiaries & Financing Partners: Nedbank Limited, EAIF and USAID (as co-guarantor) demand and will be transformative for Bugala Island. It is highly unlikely that the GuarantCo Additionality: existing dilapidated and unsafe ferry would have been replaced in the foreseeable This is a highly developmental project to bring basic utilities to the largest island in Lake Victoria and has future, nor the water supply systems required imaginative financing to attract the debt required to meet the challenging economics. GuarantCo installed. In addition, the ability for the played a crucial role over a five year period in underwriting (at times for substantially larger amounts), project to support the water supply systems structuring and executing the finance. This is the first time that GuarantCo has provided a joint guarantee is due to the project’s multi-revenue with USAID and the first time that Nedbank has been the beneficiary of a guarantee from GuarantCo. In particular, GuarantCo worked closely with USAID to amend their standard form documentation in order to streams, diversification and economies of align it more appropriately with a project financed structure. scale and scope provided by other aspects of the project. As a stand-alone project, The Kalangala Infrastructure Services project consists of the ownership, financing, upgrade, construction, these water schemes are highly challenging operation and maintenance of two roll-on roll-off passenger and vehicle ferries, the upgrade of the island’s to finance and operate. 66km main road from a dirt road to a gravel road, and a series of solar-powered pump based water supply systems, in each case to serve the population, institutions and businesses of the Island. This project is part of an integrated project with Kalangala Renewables. KALANGALA RENEWABLES
Joint partial credit guarantee totalling USD 1.4 million covering part of the financing for a hybrid solar generation system and associated transmission and distribution systems for Bugala Island in Lake Victoria, Uganda Transaction Overview
Date: December 2011 Country: Uganda
G’tCo Guaranteed Amount: USD 1 million Developmental Benefit
Total note issue : USD12 million (guaranteed tranche USD 5 million) At present there is no operational grid-based electricity supply on Bugala Island with most Beneficiaries & Financing Partners: Nedbank Limited, EAIF and USAID (as co-guarantor) of the population, schools, institutions and businesses on the Island lacking access to GuarantCo Additionality: reliable and affordable electricity. The extension of daytime activities, such as GuarantCo played a crucial role over a five year period in underwriting (at times for substantially larger studying, will add to the Island’s productivity amounts), structuring and executing the finance. This is the first time that GuarantCo has provided a joint and education. More specifically, anticipated guarantee with USAID and the first time that Nedbank has been the beneficiary of a guarantee from improvements include the following: GuarantCo. In particular, GuarantCo worked closely with USAID to amend their standard form documentation in order to align it more appropriately with a project financed structure. - Decrease in energy costs per kwh - Access to more employment opportunities Kalangala Renewables consists of a 1.6 MW (nominal) hybrid solar and diesel power generation system, -Improved literacy due to improved lighting 33kv transmission system, low voltage distribution system and the installation of a prepaid metering -Reduced time spent on collecting fuel system to households and businesses on the Island. This project is part of an integrated project with -Better healthcare through improved Kalangala Infrastructure Services. medications and sanitation measures -Improved ability to preserve and market agricultural products - Improved marketing of the island as a tourist destination thereby helping to diversify the Island’s economy.