Private Sector Finance

Guarantees

ADB's guarantee instruments cover those risks that the private sector cannot easily absorb or manage on its own. Mitigating these risks can make a crucial difference in mobilizing debt funding for private sector projects.

ADB offers two guarantee products, both of which are designed to mitigate the risk exposure of commercial lenders:

1. Partial Credit Guarantees
2. Political Risk Guarantees

PARTIAL CREDIT GUARANTEES (PCGs)

The Partial Credit Guarantee provides comprehensive cover for a specified portion of the commercial debt provided by co-financiers.

In general, ADB's PCGs cover principal and/or interest for maturities that would be difficult to obtain from commercial lenders.

PCGs are designed to cover not only hard currency debt but also local currency debt, including domestic bond issues or long-term loans from local financial institutions.

The PCG cannot be issued on a stand-alone basis and is provided only for projects where ADB has direct participation.

Our guarantee fees for private sector transactions are market determined. Fees are paid in advance and can be paid in one lump sum or in regular installments.

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POLITICAL RISK GUARANTEES (PRGs)

The Political Risk Guarantees are designed to facilitate commercial co-financing by covering specifically defined sovereign or political risks.

Coverage is available against any combination of these risks:

• Currency inconvertibility and/or non-transferability (CI)
• Confiscation, expropriation, nationalization, or deprivation of project assets (CEND)
• Political violence
• Breach of contract

The PRG cannot be issued on a stand-alone basis and is provided only for projects where ADB has direct participation.

ADB can issue a PRG without a counter-guarantee from the host government for a maximum amount of US$150 million or 50% of the project cost, whichever is lower. Under certain circumstances, the government's counter-guarantee may be required, however.

Fees are market based and consist of a guarantee fee, a front-end fee and a standby fee. These fees must always be paid in advance.