RAM Ratings reaffirms CGIF’s AAA ratings

Published on 30 Jan 2020.

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RAM Ratings has reaffirmed Credit Guarantee and Investment Facility’s (CGIF or the Fund) global, ASEAN and national Insurer Financial Strength ratings of gAAA/Stable/gP1, seaAAA/Stable/seaP1 and AAA/Stable/P1, respectively. The reaffirmation considers improvements in the Fund’s business traction, its conservative leverage and strong liquidity. The ratings also reflect CGIF’s policy mandate to develop the bond markets in the ASEAN region, the continued support of its capital contributors – the governments of China, Japan, Korea, the 10 ASEAN countries (collectively, ASEAN + 3) and the Asian Development Bank (ADB) – as well as the Fund’s strong operational ties with the development bank.

CGIF is a trust fund of ADB, established as part of the Asian Bond Markets Initiative with a mandate to develop and promote the integration of local-currency bond markets in the ASEAN+3 region. The Fund’s capital contributors have continued to demonstrate support for its cause, as evidenced by their subscription to a recent USD500 mil capital increase. To date, CGIF has received USD328 mil of USD449 mil committed. The balance will be received in stages by 2023.

CGIF issued guarantees for six new deals in 2018, a record number since its establishment. The Fund closed 2019 with USD491 mil of new guarantees issued over another six new deals, bringing its portfolio size to USD1.6 bil (end-December 2018: USD1.1 bil). Including deals closed in 2019 and additional capital contributions, our assessment indicates the Fund’s leverage (as defined in RAM’s Leverage Guidelines for Financial Guarantee Insurance Companies) is estimated at 1.0 times as at end-2019, comfortably below RAM’s threshold of 2.0 times for its ratings.

Although CGIF’s small portfolio renders it inherently susceptible to concentration risk, its guarantee portfolio is sufficiently diversified by sector. Geographically, the Fund has a large exposure to companies in Vietnam (42%) and Thailand (17%). Portfolio credit risks are mitigated by the profile of the obligors, most of whom are market leaders in their respective markets and have relatively satisfactory financial profiles. 

CGIF’s liquidity position has stayed robust, supported by liquid assets of USD1.2 bil as at end-September 2019. Its quarterly stress tests indicate sufficient liquidity in the unlikely scenario of concurrent defaults by up to four of its largest issuers. To date, the Fund has not had a claim on any of its guarantees. With bond guarantees for Vietnamese corporates almost reaching the Fund’s internal risk appetite, CGIF will shift its focus to countries such as Indonesia and the Philippines as well as those with underdeveloped bond markets such as Brunei, Cambodia, Laos and Myanmar.

Negative rating triggers include an increase in leverage in excess of our threshold for the Fund’s current ratings, heightened portfolio credit risks or adverse claims development. CGIF’s inability to further expand its portfolio to a meaningful size over the medium to long term could also be a rating concern.


Analytical contact
Hafiz Abdul Aziz
(603) 3385 2534

Media contact
Padthma Subbiah
(603) 3385 2577


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2020 by RAM Rating Services Berhad

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