Hard Currency Guarantee providing Local Currency Financing

In order to alleviate any foreign exchange risk being imposed on the beneficiary, GuarantCo will provide guarantees with an exposure cap stipulated in local currency.  However, it may be more appropriate to provide a guarantee in an alternative currency and this will be considered on a case-by-case basis.
 

For example, if the financing is regional and covers more than one local currency, it may be more appropriate to use a commonly accepted currency.  GuarantCo is currently considering a transaction where it may provide a dollar guarantee over a mezzanine tranche for a regional securitisation transaction.  The Dollar debt raised will be lent within each of the countries covered by the transaction but will be swapped into local currency.  Therefore, the ultimate borrower is still borrowing in local currency.

Another variation could occur when both a local and hard currency debt tranche is required as this matches the offtake payment profile for a particular project.  If both tranches of debt require a guarantee then this could be considered, particularly if the hard currency is also being provided by local institutions.