Lahore, July 26, 2023 (PPI-OT): Pakistan Services Limited’s (The Company) has a leading position in the hospitality industry. Ever since the pandemic Covid-19, the hotel sector has been under pressure. Furthermore, the slowdown in domestic activity, coupled with hyperinflation, low foreign reserves, a depreciating currency and a high-interest rate environment impacted the sector's performance. Given the above facts, the operational cashflows did not improve to make repayments. In full cognizance of the situation, the Company was pursuing a sale plan of its fixed assets, primarily properties.
The management was hopeful to complete the sale transaction however, were not able to dispose of some big assets as targeted. Over the last couple of months, the management started to face material uncertainty around the company's operations, as disclosed in the recently published financial statements for six months ended on 31st Dec'22. This led to the revision and adjustment of ratings on 15-Mar-23. Thereafter, the management has represented that they have expressed intention to settle the debt while aligning the financial obligations with the operational realities and successfully managed to repay a principal and interest which was due on 31st Dec'22.
In continuation of the management's efforts, on Jun'23 as per the consent of the lenders, all long-term loans have been restructured where principal repayments along with mark-up due at end Mar'23, Jun'23, and Sep'23 are deferred till Dec'23. As per the revised agreements i) The Managing co-owner undertakes that it shall utilize excess cash/EBITDA during the financial year to satisfy the payments obligation on pro-rata basis ii) The Sponsor guaranteed amounting PKR 7.66bln with respect to deferred payments-2023.
iii) The Managing co-owner undertake that any shortfall in the proceeds from the disposal of the sale assets/properties to be disposed of or in the case where the sale assets/properties are not sold off shall be in the first instance be paid by the managing Co-owner from his own resources or procure additional funding from the sponsor and iv) the managing co-owner undertakes to open and maintain an escrow account within 45 days from the date of execution of this second supplemental for pro-rata distribution of proceeds from the disposal of sale assets. Hence the debt obligations falling due in Dec'23 are linked with sale of properties while remaining liabilities will be aligned with the emerging pattern of future cash flows. Rating would remain dependent on the effective implementation of the envisaged strategy.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com
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