African Trade Insurer tapped to insure $250 million landmark financing facility

Wednesday August 10, 2011

African Trade Insurer ATI took part in the signing of a historic deal on Monday on Monday 8 August, 2011. The deal is a $250 million seven-year loan facility arranged by a syndicate of local and global financiers, an Export Credit Agency and ATI ? Africa?s multilateral credit and investment insurer. The government of Tanzania will use the funds for infrastructure development, mainly in the areas of power and roads. This marks the first time Tanzania has sought commercial financing for its long-term development needs.

ATI was selected to insure a $50 million segment of the larger facility based on its key strengths: strong capitalization reinforcing ATI?s ability to pay claims; an investment grade rating by Standard & Poor?s rating agency; an ability to mobilize global insurers; and a Preferred Creditor Status, which acts as a deterrent against governments causing claims in any ATI-backed deal.

?Our unique structure ? we are the only multilateral insurer with a Pan African focus ? has helped us attract global financial and insurance partners who, in many instances would only invest in or insure a project with ATI?s participation. This is our value added. We are able to pave the way for increased financial and insurance capacity in countries that might otherwise be shunned by the international market as too high risk,? commented George Otieno, ATI?s Chief Executive Officer.

A combination of economic uncertainty in many donor countries and a growing interest in Africa from international investors may force some countries to look to alternative sources such as facilities like this for financing. Traditionally Sub-Saharan Africa countries have looked to donor funding and more recently, bond issuances to raise capital for infrastructure finance. But with decaying road, water and power networks that will require at least $93 billion a year to modernise, Tanzania?s initiative may be seen as a precursor to a larger trend as African countries strive to meet their development objectives.

Donor aid statistics are encouraging but they do not take into account gaps in what is eventually received as well as recent price fluctuations of basic food commodities. While 2010 saw donor aid reach its highest level ever at $128.7 billion, a 6.5% increase over 2009, there is a gap in what has been promised and what has been received. Africa has only received $11 billion of the $25 billion pledged in 2005 at the G8 summit in Gleneagles.

In anticipation of growing demand, ATI has broadened its global network to include partnership agreements with Germany?s Official Export Credit Agency, Euler Hermes; the Export Credit Guarantee Company of Egypt (ECGC); America?s Overseas Private Investment Corporation (OPIC); the Saudi Fund for Development; and the Islamic Corporation for Insurance of Investments and Export Credit (ICIEC). And as a signal of ATI?s growing importance in the OECD market, SACE, Italy?s Export Credit Agency became a member of ATI with a $10 million investment in 2010.

Tanzania is a founding member of ATI. The country received close to $13 million worth of insurance support in 2010 covering the commercial and political risks of infrastructure projects. In 2010, ATI doubled its support of infrastructure projects over 2008 figures insuring projects in African member countries valued in the hundreds of millions of dollars.