1 What is Financial Guarantee Insurance?
Financial Guarantee Insurance/Financial Guarantee, also commonly referred to in the capital market as a “Wrap” or “Credit Wrap”, is a form of guarantee for bonds/sukuks whereby the provider of the Financial Guarantee (Guarantor) promises to step in to make the coupon/profit (equivalent to “interest”) and principal payment to the bond/sukuk holders, on behalf of the issuer, should there be a claim made.
In return for the Financial Guarantee, the bond/sukuk issuer pays a fee to the Guarantor.
2How does Danajamin’s Financial Guarantee work?
Danajamin’s Financial Guarantee acts as a form of credit enhancement to the bonds/sukuk issued.
With Danajamin’s Financial Guarantee, the credit rating of the bonds/sukuk will be AAA(fg), the highest credit rating accorded to bonds/sukuk. With the improved rating, issuers will be more assured of a successful bonds/sukuk issuance. Investors, on the other hand, will have an opportunity to invest in AAA-rated papers that are guaranteed by Danajamin.
3Is Danajamin’s Financial Guarantee irrevocable & unconditional?
Yes. Akin to a Bank Guarantee, Danajamin’s Financial Guarantees are contractually irrevocable & unconditional in nature. Please refer to Our Financial Guarantee page for more information on Danajamin’s Financial Guarantee.
4Danajamin has guaranteed many bonds/sukuk since 2010. Are there any differences between these Financial Guarantees which would affect the level of protection to be accorded to investors?
No. All Financial Guarantees issued by Danajamin to-date are irrevocable & unconditional and they offer the same level of protection to investors.
5On submitting a claim for payment, how fast will Danajamin make the payout to investors/trustees?
Danajamin is legally/contractually obliged to make good of any claim within 10 business days. Payout and timing of payout to Investors/trustees will not be affected by any legal recovery process on the affected account.
6Danajamin has been partnering with banks to guarantee transaction? Why is that so?
Our partnership with the banks is testament to our commitment to complement the banking industry in providing funding options to corporations.
In addition, risk-sharing is also beneficial as it allows, amongst others, better management of our Financial Guarantee portfolio risk exposure. Further, it lends credibility and market validation to the transactions when differing partner banks (in addition to Danajamin) obtain the necessary approvals to participate in the same.
7Is Danajamin guaranteeing transactions the market would not ordinarily take?
No. To-date, the majority of transactions guaranteed by Danajamin involve risk co-participation with our partner banks. These may include arrangements such as co-guaranteeing or fronting structures (with AAA rated and non-AAA rated banks, respectively).
These risk co-participation arrangements in itself speaks of the acceptable credit proposition of a transaction and demonstrates market validation of the type of transactions Danajamin are participating in.
8Will Danajamin continue to exist for as long as the Financial Guarantees it has issued? Is Danajamin intended to be a finite life agency ?
Danajamin is not a finite life agency and is intended to be a going concern.
This is in consistent with Danajamin’s role as a catalyst to stimulate and further develop the Malaysian Capital Markets which is a longer term objective.