Financial Guarantee Valuation

Valtech’s valuation team has recently completed a financial guarantee valuation for a listed company in Hong Kong.

Financial guarantees are very commonly used by companies in order to obtain beneficial funding terms and interest rates. These guarantees will create a contingent liability for the guarantor, which requires to be recorded as fair value on initial recognition under HKFRS 9.

If a premium is paid for the guarantee, then the premium itself can directly be adopted as the fair value. Yet, most of the time there won’t be an actual premium paid, for example when the parent company provides a guarantee for their subsidiaries. For these cases, fair value assessments are needed.

There are lots of different ways to calculate the fair value of a financial guarantee, e.g. by market value, by contingent claims, or by credit spread, etc. All of these methods are viable and might be preferred over one another depending on the information available. It is highly recommended to hire a professional valuer to help solve these kinds of issues. Valtech’ team have good experience and qualification in handling these types of valuation.

About Valtech Valuation

Valtech Valuation is a professional valuation firm accredited with ISO-9001 in valuation advisory services. The firm is renowned for its expertise in advanced valuation techniques, customized valuation models, data-driven insights, and adherence to compliance and reporting standards. The firm has a solid track record in valuation advisory for listed companies, private equity, fund managers, and financial institutions. Valtech’s qualified team comprises members with PhDs, CPA (HKICPA), CFA, Chartered Valuation Surveyors of the Royal Institution of Chartered Surveyors, and valuers accredited with Business Valuation (ABV) by AICPA and CVA qualifications in Singapore. Valtech continues to expand into more markets by leveraging its valuation platform and recruiting local experts.