• A non-stock and non-profit corporation which is

an Association of universal and commercial banks

operating in the Philippines

• Entered into Shareholders Agreement with LGUGC

in trust for 14 investor banks

• Owns 46.6% of LGUGC stocks

• A state-owned development financial institution

with the objective of providing banking services

that cater to medium and long-term needs of

agricultural and industrial enterprises with

emphasis on small- and medium-scale industries

• Owns 46.9% of LGUGC stocks

VISION

*To be the recognized private sector link in public-private

partnerships for local development financing

MISSIONS

*Advocate for reforms that will mobilize resources of the

private sector toward financing local development

projects;

*Continue to advocate for policy reforms for local

government unit (LGU) debts, whether bond floatation or

direct loans, and

*Instill value of good governance to enhance the

borrower’s enterprise management and creditworthiness,

especially local government and utility companies

• Incorporated in March 1998 with 51% ownership by BAP member banks, stockholdings of which are held in trust by BAP, and 49% DBP ownership

• Intentionally registered as a private corporation to be more flexible in responding to market demands

• Initially opened only to Local Government Units (LGUs)

• Essentially launched the Municipal Bond Market in the Philippines

•Opened to Electric Cooperatives (ECs) in 2004 upon agreement with World Bank and Republic of the Philippines (RoP) to manage the Electric Cooperative System Loss Reduction Project-Partial Credit Guarantee (ECPCG) Program

• Opened to Renewable Energy Projects in 2006 upon agreement with UNDP

and RoP to manage the Capacity Building to Remove Barriers to

Renewable Energy Development-Loan Guarantee Fund (CBRED-LGF),

now renamed Deparment of Energy-Loan Guarantee Fund (DOE-LGF)

• Opened to Water Districts (WDs) in 2008 upon the invitation of USAID-

Philippine Water Revolving Fund Support Program

• Recently named Program Manager by the European Union, World Bank and

DOE for the Access to Sustainable Energy Programme (ASEP) for

photovoltaic mainstreaming and rural network solar projects

RELATIONSHIP MANAGEMENT WITH FINANCIAL INSTITUTIONS

CREDIT RATING

CREDIT GUARANTEE

GUARANTEE PROGRAM

MANAGEMENT

COLLABORATION WITH NATIONALGOVERNMENT

Financial Institutions

• Pays loans / bond amortization

• Calls on guarantee if borrower defaults

BORROWER

AAA Due Diligence / Credit Rating

• Provides loans

• Underwrites bond issues

• Guarantees FIs against borrower default

• Pays FIs in case of default according to original

amortization schedule

Provides up to

50% co-guarantee

for water projects

Republic of the Philippines

DOF and DOE

Guarantee Program

Implementation Agreement

ROP Grant Agreement

US$12MM

Guarantee Program Manager

Guarantee Reserve Escrow Agreement

Escrow Agent

As Implementing Agency of GEF

World Bank

Project Agreement & LGUGC Grant Agreement

Republic of the Philippines

DOF and DOE

Guarantee Program

Implementation Agreement

ROP

Grant

Agreement

Guarantee Program Manager

Guarantee Reserve Escrow

Agreement

Project Agreement & LGUGC Grant Agreement

Global

Environment

Facility

United

Nations

Development

Programme

ESCROW AGENT

Implementing Agency Grant Provider

US$1.6MM

BORROWER TYPE NOS. OF

PROJECTS

AGGREGATE LOAN

AMOUNT

(US$ MM)

AGGREGATE

GUARANTEED

AMOUNT

(US$ MM)

LEVERAGE RATIO

vs. LGUGC CAPITAL

(x)

Local Government Units - Bonds 17 68 68 14.80

Local Government Units - Direct

Loans

13 22 19

4.88

Local Government Units - AGL 9 18 16 3.96

Water Districts 15 45 38 9.68

Electric Cooperatives 5 9 7 2.00

Medium and Large Ent. 21 44 37 9.56

TOTAL 80 207 185 44.89

* Leverage ratio computed using LGUGC paid-up capital of US$5MM and aggregate loan amount @ P46.92=US$1

LGU GUARANTEE CORPORATION

As of December 31, 2015

BORROWER TYPE NOS. OF

PROJECTS

AGGREGATE LOAN

AMOUNT

(US$ MM)

AGGREGATE

GUARANTEED

AMOUNT

(US$ MM)

LEVERAGE RATIO

vs. PROGRAM

FUND (x)

ECPCG 19 61 49 3.81

CBRED-LGF 3 2 2 1.36

REGULAR ECPCG CBRED-LGF

Lender Any LGUGC partner

financial institution (PFI)

Any LGUGC PFI Any LGUGC PFI

Loan Term Cash flow-based Up to 10 years Up to 10 years

Grace Period Depending on project

requirement

At least 1 year grace

period, but not to exceed

the PFI loan term

Maximum 2 years grace

period, but not to

exceed the PFI loan

term

Single Guarantee

Limit

25% of LGUGC Net

Worth

USD2.5 Million PhP50 Million

Guarantee

Coverage

Up to 85% of the debt

service to the PFI; up to

80% for ECs

Up to 80% of the loan

principal amount and 3

months interests, subject

to LGUGC interest rate

cap

• Up to 85% of the

principal

amortization

• To be determined

based on PFI request

and Borrower Risk

Rating results

Guarantee Fee • Risk-based

• Ranges from 0.25%

to 2% per annum

0.25% per annum 0.25 per annum

LGUs : • Provinces, cities or municipalities

• Minimum investment grade rating

WDs : • Minimum investment grade rating

MLEs : • Private corporations not included in the Top 1,000

• Above-average borrower risk rating score

ECPCG : • EC cooperatives registered with NEA or CDA

• Above-average borrower risk rating score

DOE-LGF : • LGUs/NGOs/POs/ECs/MLEs

• RETPs

• Microfinance Industries (MFIs)

LGUs WDs

• Agri-business and food production

• Development of industrial estates

• Hospitals and healthcare centers

• Power plants and distribution systems

• Public markets

• Public transport facilities and

government housing development

• Schools and daycare centers

• Slaughterhouses

• Communication systems

• Renewable energy technology projects

• Other revenue generating projects

• Non-revenue generating basic services

projects

• Water source development and

protection

• Treatment and Level III distribution

systems

• Sanitation

• System upgrading and reduction of

non-revenue water (NRW)

• Bulk water supply

• Rehabilitation and expansion

• Support facilities

MLEs ECs DOE-LGF

• Toll, roads and bridges

• Tourism promotion and

development projects

• Water source development,

supply, sewage and

sanitation systems

• Solid waste management

• Contracts (incl. BOT and

JV) with LGUs, GOCCs

and government agencies

for infrastructure projects

• Contracts with Top 1000

Corporations for

infrastructure projects

• RE projects

• Other projects acceptable to

LGUGC Board

• Rehabilitation and capacity

upgrades (incl. purchase of

second-hand sub-

transmission facility) to

improve the reliability,

efficiency and safety of

supply system and the

quality of service to

customers

• Removal of supply system

constraints

• Purchase of necessary

hardware, software, motor

vehicles, tools and

equipment to improve

employee productivity and

customer service efficiency

• Hydropower (pico-hydro,

micro-hydro, mini-hydro)

• Biomass-based system

(biogas, direct burning for

power and non-power

applications)

• Wind (power and non-

power)

• Solar (photovoltaic systems

and solar water heaters)

*United States Agency for International Development (USAID) – Development Credit Authority (DCA): Co-Guarantee Agreement for Water Projects

*World Bank – Global Environment Facility Electric Cooperative System Loss Reduction Project – Partial Credit Guarantee Program (ECPCG): Program Management Agreement

*Department of Energy – Loan Guarantee Fund (DOE-LGF) for Renewable Energy Proponents: Program Management

*European Union (EU)/Global Partnership on Output-Based Aid (GPOBA)/World Bank – Access to Sustainable Energy Programme: Program Management Agreement

* Various Technical Assistance (TA) from USAID for the ff:

• Design and Development of internal LGU Credit Screening and Rating System (LCSRS),

• Computerization of LCSRS,

• LCSRS database update,

• Review and recommendation of the LGUGC guarantee policies and procedures,

• Design of Credit Rating for Water District (CRWD) System; and

• Development of LGUGC guarantee pricing guide mechanism.

* TA from Australian Aid through the Philippines-Australia

Governance Facility for the improvement of LCSRS and design and

computerization of LGUC Portfolio Monitoring and Management

System

LGU Guarantee Corporation

Unit 2801, 28/F, Antel Corporate Centre

121 Valero St., Salcedo Village, Makati City

Tel: (02) 751-8764 to 68

Fax: (02) 888-4217

Website: www.lgugc.com

Banco de Oro Unibank, Inc Philippine Veterans Bank

Bank of the Philippine Islands Rizal Commercial Banking

Corporation

Development Bank of the Philippines Robinsons Banking Corporation

EastWest Banking Corporation Security Bank Corporation

Land Bank of the Philippines Union Bank of the Philippines

Metropolitan Bank & Trust Company United Coconut Planters Bank

Philippine National Bank

CREDIT SCREENING AND RATING MODEL: STAGES

CREDIT WORTHINESS CRITERIA

Credit Rating

A

Management

Operating Performance

Financial Condition

Development Capacity and Socio-Economic Endowment

Management Risk

Operating Performance and Financial Condition Risks

Development and Endowment Risk

Political Risk Tendency for Efficient Debt Repayment

LGU CREDIT SCREENING AND RATING SYSTEM (LCSRS)

TENDENCY FOR DEBT REPAYMENT

DEVELOPMENT AND ENDOWMENT RISK

Credit Groups

1

Economic and Political Endowment Risk

B Development

Risk

A

C

D

2

Risk of Unilateral Restriction

of Debt Payments

Credit Screening

1.A

1.B

1.C

1.D

2.A

2.B

2.C

2.D

OPERATING AND FINANCIAL CONDITION

RISK

MANAGEMENT RISK

Preliminary Credit Rating

Final Credit Rating

Operating

Financial

Management Ba

Aaa

Aa

A

B

C

Credit Rating

LCSRS RATING METHODOLOGY

Financial risk

Operating risk

Regulatory risk

Management risk

Economic risk

Cre

dit

ra

tin

g

CREDIT RATING FOR WATER DISRTRICT

(CRWD)

BB --------Inadequate Safety

BBB --------Moderate Safety

AA -------- High Safety

B ------- High Risk

A -------- Adequate Safety

C ------- Substantial Risk

D -------- Default

AAA --- -- Highest Safety

---------------------------------Investment Grade cut off -----------------------------------------

Categories AA to B have modifiers ‘+’ and ‘-’ suffixed

WD RATINGS

*

*

*