India Infrastructure Finance Company Ltd (IIFCL) wants to rope in more partners to share its risks under the newly introduced credit enhancement facility.
The State-owned infrastructure lender has written to the Government seeking permission to bring in the World Bank Group, Power Finance Corporation and other institutions as partners for sharing the risks under this facility.
Currently, the Asian Development Bank (ADB) is the only institution partnering IFCL for sharing the risks arising from credit guarantees provided to project bonds of infrastructure providers. ADB is extending backstop guarantee to IIFCL, sharing as much as 50 per cent of the risks.
The suggestion to allow more partners is timely as the Government is in the process of firming up a regular credit enhancement scheme, which is likely to be ready by the end of this calendar year, said S.K.Goel, Chairman & Managing Director of IIFCL.
IIFCL is open to the idea of the new partners providing backstop guarantee or co-guarantee, a senior official said.
Through credit enhancement, a lender is provided reassurance that a borrower will honour the obligation through additional collateral or third party guarantee.
It reduces credit/default risk of a debt, thereby enhancing credit rating and lowering the interest rates on the debt.
The state-owned infrastructure lender had in 2012-13 executed the guarantee document in respect of the first pilot transaction under its innovative initiative of credit enhancement.
More such transactions are in the pipeline and at least four more could happen before the end of the year, Goel said. These likely transactions are in the road (two) and wind energy space (two).
ADB Line of Credit
Goel said that ADB had agreed in-principle to provide a $ 1.2 billion line of credit to support IIFCL’s lending operations. This is in addition to the existing line of $ 1.2 billion from the Manila-based development bank. IIFCL has already drawn $ 1 billion from this existing line.
Srivats.kr@thehindu.co.in