Guarantee firm set up to help Asian companies

Guarantee firm set up to help Asian companies

JAKARTA (JP): The International Finance Corporation (IFC), an
affiliate of the World Bank, and the Financial Security Assurance
(FSA) will soon establish a financial guarantee company to
operate in Asia.

The planned guarantee firm, to be named the Global Guaranty
Association, is expected to be headquartered in Singapore, the
two financial companies said in a joint press statement made
available yesterday.

The association's primary business would be to provide
guarantees for infrastructure financing and security measures in
emerging markets with an initial focus on Asian countries.

"FSA and IFC plan to approach several major institutions to
discuss the feasibility of the proposed venture," the statement
said.

The Financial Security Assurance is the first financial
guarantor outside the United States, providing a guarantee for
the first British residential mortgage-backed transaction in
1987, while the International Finance Corporation, a member of
the World Bank Group, is the largest multilateral source of
equity and loan financing for private sector projects in
developing countries.

Since their inception in the early 1970s, the use of financial
guarantees have been an effective means of lowering costs and
achieving access to capital markets. For investors, such
guarantees offer credit protection and enhances liquidity in the
secondary market.

Among the kinds of transactions the association will provide
are credit enhancement for power projects, toll roads and water
treatment plants, as well as asset categories such as residential
mortgage loans, credit card receivables, automobile loans and
leases, trade receivables, equipment leases and personal consumer
loans.

"These transactions could be structured for distribution in
both the public and private domestic sectors and international
capital markets," the statement said. (hen)