Karachi, September 17, 2018 (PPI-OT): JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned preliminary medium to long term rating of ‘AA’ (Double A) to the proposed Privately Placed Term Finance Certificates (PPTFC) issue of Rs. 4.6b of AHL. The assigned rating signifies high credit quality with strong protection factors. Risk on the instrument is considered moderate but may vary slightly from time to time because of economic conditions. Outlook on the rating is ‘Stable’.
AHL plans to acquire a PPTFC amounting to Rs. 4.6b for partially expanding its properties while the remaining proportion will be utilized for retiring existing debt on the books. This loan will be present on the books of AHL while it will be completely serviced by one of AHL’s largest existing tenant, Unilever Pakistan Limited (Unilever), one of the largest FMCG operating in Pakistan for a number of decades with last reported turnover of Rs. 86.3b and net profit of Rs. 13.2b. Unilever’s parent company, Unilever PLC, carries an international long term rating of ‘A+’ by Fitch.
Unilever has been a tenant of AHL for 35 years. The facility, agreed upon by AHL and Unilever, is structured as an advance discounting of the lease rental agreement for nine years. The security structure is tripartite [lenders, AHL and Unilever] with Unilever giving an undertaking to pay principal and mark-up payment on the PPTFC against rent payable in lieu of advance rent they would have ordinarily paid. The facility is additionally secured by a charge on assets of AHL.
While the debt will be present on AHL’s books, Unilever through irrevocable instructions to its banker will make principal and mark-up payment on the PPTFC into an account with the agent bank. Rental income from other clients is expected to provide adequate cushion for repayment of other existing debt. Current rating of the instrument entirely depends upon financial strength of Unilever and the lease agreement between AHL and Unilever; any changes in profile of the lessee would have an impact on the same.
The four to five star hotel industries in Pakistan is concentrated in a few hotels with strong demand correlation with the economic and business activity. As per management, the improving law and order situation in the country along with recovery in the economy will positively impact the high-end hotel industry of Pakistan. In view of this stance, AHL is concerting efforts by increasing presence in main cities of Pakistan.
For more information, contact:
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk