Solutions

Solutions We Provided for SCIC Clients

SCIC Client Case Studies

Client

The Risk Management Group of a financial institution.

Client Objective

Client wishes to revise its internal rating system.

Problem

Client had an internal rating system but it was not sufficiently granular to accommodate an expanded volume of loans and guarantees for a wider creditor universe. It needed the system to be Basel II compliant and wanted to follow international best practice by assessing both borrower and transaction risks.

Analysis

SCIC studied internal rating systems of similar institutions in order to gain a market perspective. SCIC analyzed the Client's (i) internal ratings, mapping them to external ratings and (ii) internal rating methodologies.

Solution

SCIC developed a credit risk classification system with finer granularity incorporating both borrower and transaction dimensions, and provided rating methodologies for different classes of borrowers and transactions, improving the Client's capacity to assess individual and portfolio credit risks.

Benefits

The Client now has a common internal language and process for credit risk assessment and monitoring which facilitates more focussed discussion on credit risks among deal origination, risk management, and risk monitoring staff. The client is better able to assess its capital adequacy and use robust internal ratings as inputs for its economic capital model.

Client

A specialized European lender.

Client Objective

Client seeks an Investment Grade (Triple-A) rating on a stand-alone basis (without a government guarantee).

Problem

The client, which was formerly guaranteed by its triple-A rated sovereign owner, was facing the prospect of a reduction in the government's shareholding and a loss of the government's guarantee.

Analysis

SCIC believed that the Client's creditworthiness was strong and demonstrable with careful written and oral presentations on its solid balance sheet, shareholder relationships, and prudent financial controls to ensure sound asset quality, liquidity and capitalization.

Solution

SCIC prepared a comparative credit analysis showing the credit strengths of the Client in relation to its peer group, coached the Client for meetings with the ratings agencies, advised on follow-up questions from the rating agencies and thus helped the Client obtain top ratings.

Benefits

The Client obtained triple-A ratings from both Moody's Investors Service and Standard & Poor's and launched a multibillion dollar borrowing program in the international capital markets.

Client

De novo non-bank finance company (NBFC) in an emerging market country specializing in student lending for domestic and US graduate studies.

Client Objective

Client needs private equity investors.

Problem

Promoters needed a seed equity investment from a strategic partner to build credibility and commence operations and second-stage equity to take out the original investor.

Analysis

Client had built value in a prior new venture in business process outsourcing with a US investor and US clients; the client had also built value in the de novo-NBFC space which could attract a second-round investor.

Solution

SCIC identified an initial strategic investor with experience in the international student loan markets; two years later SCIC identified a second-round investor who bought out the original investor.

Benefits

Client was able to successfully launch a new venture and grow it to a ~ US$700 million equivalent balance sheet.

Client

International financial institution.

Client Objective

Developing financial guarantee products for emerging markets.

Problem

The Client wanted to develop financial guarantee products to deploy its triple-A ratings to support asset-backed and infrastructure revenue-backed financings for private sector clients to promote domestic capital market development.

Analysis

Client has provided political risk guarantees and wishes to provide financial guarantee products that add value either alone or in conjunction with public-private partnerships.

Solution

SCIC designed a menu of credit guarantee products for the Client to offer. The menu was approved and is now being offered to the market. SCIC also helped the Client work with the private financial guarantee industry with co-insurance structures.

Benefits

Client guarantee provides higher ratings and facilitates collaboration with international financial guarantors and local market sponsors, facilitating capital market access for private sector entities.

Breadth of Experience

SCIC Clients

SCIC's clients have included commercial financial institutions (primarily banks, non-bank financial companies and insurers), multilateral development finance institutions, and government-owned financial institutions

SCIC has advised banks, non-bank finance companies and insurers / reinsurers on varied, successful assignments. Clients have included banks in Europe, Africa, Middle East and Asia. Clients have included the UBS, Dexia, Banco Finantia, ICICI, HDFC Credila, Access Bank of Nigeria, Union Bank of Nigeria, Ecobank Transnational Inc., TAIB, BPN, Sterling Bank, Baytree Finance Company, Africa Reinsurance Corp., etc.

Rating Advisory services
  • Carried out an internal assessment on the feasibility of investment grade ratings for a bank and helped the client achieve and maintain it
  • Advised a number of banks and insurance companies on maintaining and improving credit ratings from several rating agencies, including in situations involving major acquisitions and macroeconomic deteriorations
  • Advised a number of banks (including a bank holding company) on improving communications with global credit rating agencies to maintain and enhance existing and new credit ratings
  • Advised on ratings from international as well as local market credit rating agencies
Credit Enhancement services
  • Advised a bank on market demand and business plan for providing credit enhancement, leading in to a $2.6 billion acquisition of a non-bank financial guarantor
  • Developed business plans for the establishment of financial guarantee companies and of non-bank finance companies for structured and infrastructure finance, helping find investors to establish the companies
  • Evaluated a bank's capabilities to originate, underwrite and service mortgage loans for a securitization without third party credit enhancement
Structured Finance
  • Advised a non-bank finance company on access to capital markets via the structuring and implementation via a commercial paper conduit of its first insurance premium receivables securitization
  • Developed a structure for a bank to securitize interest only strips of US Government guaranteed loans made to small and medium enterprises (SMEs)
  • Helped a bank validate internal models for the valuation of complex single-name and structured CDS portfolios
  • Helped a bank train its structured finance team for 18 months.

SCIC has advised multilateral development banks or ratings, risk management, and structured finance. Clients have included the World Bank, NIB, Inter-American Development Bank, Central American Bank for Economic Integration, African Development Bank, Africa Reinsurance Corp., Asian Development Bank, Africa Finance Corp., Banque Ouest Africaine de Développement, East African Development Bank, OPEC Fund for International Development, etc.

Rating Advisory services
  • Assessed preparedness to obtain formal credit ratings
  • Advised on initial ratings with the major rating agencies and helped achieve investment grade ratings.
  • Advised on rating agency presentations, both written and oral, resulting in rating upgrades, including to investment grade.
  • Successfully appealed potential rating downgrade, retaining top ratings although all shareholders were downgraded
  • Advised on a negative rating outlook in 3Q2013 which was changed to stable in mid-2014, with an A rating
Risk Management services
  • Developed an internal credit risk rating system for private sector loans and guarantees for project and structured financings, corporations, sub-national governments and financial institutions
  • Helped train investment officers and risk management staff on the use of its new internal ratings methodology
  • Assessed if a project financing facility should be rated higher than the country rating (including assessment of impact of a huge mining project investment on the country rating)
  • Assessed enterprise risk management processes, policies and tools and recommended improvements
  • Built an internal economic capital model
Structured Finance
  • Developed a menu of partial credit guarantee products and risk sharing methodologies for use in private sector structured and corporate financings
  • Analyzed capital structure to increase headroom for expansion of lending activities to emerging markets without a rating downgrade
  • Developed underwriting guidelines for secondary housing finance credit exposures
  • Conducted a survey and analysis of private sector investments in infrastructure and drew lessons for the World Bank to collaborate with the private sector

SCIC has advised government-owned financial institutions primarily on ratings and structured finance. Clients have included the Central Bank of the Bahamas, Bank of Uganda, OeKB, Swedish Export Credit, Kommunalbanken Norway, etc.

Rating Advisory services
  • Advised export credit agencies on rating agency presentations, resulting in top credit ratings without government guarantees
  • Advised municipal lenders on rating agency presentations, resulting in top credit ratings without government guarantees
  • Advised Ministry of Finance and the Ministry of Local Government as shareholders of government-owned financial institutions on how to conduct their presentations to the rating agencies
Structured Finance
  • Advised a municipal lender on the potential issuance of infrastructure revenue bonds to attract private investment to finance essential infrastructure
  • Advised Central Banks on the enhancement of the liquidity of government bond markets and the creation of structured finance markets
  • Assessed for a central bank the performance of the external managers of its international reserves and recommended changes in its investment guidelines and its mix of managers