Global Guaranty Plans Office In India

It will provide guarantee for financial instruments floated exclusively to finance infrastructure and asset-backed securities in India, said Richard Holzinger, CEO, yesterday.

Holzinger,here for the ICRA conference, said the Singapore company is a joint venture between three principal investors: Financial Security Assurance, the International Finance Corp and Temasek, the private investment arm of the Government of Singapore.

The equity base of GGA, whose representative office will start operations by year end is in the region of $250 million, Holzinger said. He added that they will guarantee both foreign currency loans and domestic borrowings of Indian corporates.

We will not go for unmatched currency risks in overseas loans, he added.

 

GGA will set up an Indian subsidiary if the company receives enough projects over the next few years. FSA has already set up subsidiaries in London and Paris since the business there is good, the GGA chief said. Guaranteeing of financial instruments which is a new concept in India will help the issuer in bringing down his cost of borrowings through the backing provided by GGA.

We are AA rated by Standard & Poors and we back the credit worthiness of asset backed or revenue backed projects like infrastructure projects that might otherwise have problems with their rating, Holzinger said.

Explaining the way premium will be charged by the company, he said if a corporate without our gurantee can raise funds at 250 basis points above LIBOR and after we have given the guarantee, the LIBOR rate comes down to 200 basis points, a portion of the margin of 50 basis points is charged as premium.