RAM reaffirms CGIF’s AAA ratings on global, Asean and national scales
RAM Ratings has reaffirmed Credit Guarantee and Investment Facility’s (CGIF) global, Asean and national insurer financial strength ratings of gAAA/Stable/ gP1, seaAAA/Stable/seaP1 and AAA/Stable/P1, respectively.
The reaffirmation reflects CGIF’s conservative leverage, its role in the development of the regional bond market as well as sponsorship and support from key contributors, which includes operational ties with Asian Development Bank (ADB).
CGIF’s leverage is expected to remain within the threshold for its ratings, supported by a planned capital expansion. Its liquidity profile has also stayed strong, RAM said in a statement yesterday.
“As at end- November 2017, CGIF’s portfolio comprised 11 issuers, with a total outstanding insured value of US$ 924.6 million.
“The fund’s portfolio is spread out across nine sectors, with issuers from Indonesia and Vietnam making up 55 per cent of its insured portfolio by outstanding guarantee value,” it added.
RAM further saw that CGIF’s guarantee portfolio has been slow to gain traction, with an average of two to three new issuers per year since its inception.
“While the fund has a healthy pipeline of deals for 2018, the progress of new deals is expected to remain measured, particularly in emerging Asean economies, where bond market infrastructure is limited,” it added,
“A relatively small portfolio renders CGIF inherently exposed to concentration risk as well as the economic and business stress of issuers in its portfolio.
“We take comfort in the Fund’s comprehensive risk management practices which include limits to monitor sector, industry and country concentration.”
Despite CGIF’s exposure to lower-rated countries in Asean, RAM said many of the issuers are leading corporates with sizeable market shares in their respective markets.
“CGIF’s leverage ratio remained stable at 0.9 times as end- September 2017 amid subdued portfolio growth.
“In December 2017, CGIF’s contributors approved a US$500 million capital increase which will boost the Fund’s guarantee capacity.
“Notwithstanding deals in the pipeline which could result in the potential doubling of its guarantee portfolio, CGIF’s leverage is anticipated to stay well within the 2.0 time-limit for its ratings.