VIS Assigns Initial Entity and Sukuk Ratings to OBS AGP (Private) Limited

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Karachi, May 03, 2021 (PPI-OT): VIS Credit Rating Company Ltd. (VIS) has assigned initial entity ratings of ‘A/A-1’ (Single A/A-One) to OBS AGP (Private) Limited and preliminary rating of A+ (Single A plus) to the proposed Sukuk issue of Rs. 2,600m. Outlook on the assigned ratings is ‘Stable’. Long term rating of ‘A’ signifies good credit quality with adequate protection factors. Risk may vary slightly from time to time because of economic conditions. Short Term Rating of ‘A-1’ indicates high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors and minor risk factors.

OBS AGP (Pvt.) Limited has entered into an agreement with Sandoz AG to acquire pharmaceutical brands of Sandoz Business Division in Pakistan. The capital requirements for this acquisition is Rs. 3,700m. The acquisition is being conducted through OBS AGP (Private) Limited, a Special Purpose Vehicle (SPV) which will be a subsidiary (65% stake held) of AGP Limited (AGP).

AGP is a subsidiary (52.98% stake held) of Aitkenstuart Pakistan (Private) Limited (APPL) which is a wholly owned subsidiary of OBS Healthcare (Private) Limited. OBS group is well entrenched in the pharmaceutical industry and currently operates in the country via two companies (AGP Limited and Aspin Pharma (Pvt.) Limited).

The transaction would be financed through an equity contribution of 30% (65% by AGP and 35% APPL) while the remaining 70% will be funded by a Sukuk issue. The company intends to raise Rs. 2,600m through a Sukuk issue with a tenor of 5 years (including one year grace period). Principal amount will be redeemed through sixteen consecutive, fixed, quarterly installments with quarterly profit payment frequency. Security structure of the Sukuk entails a pari-passu charge on fixed assets of AGP and pledge of shares of AGP held by APPL. Sukuk ratings are supported by the establishment of a rental payment reserve account wherein the rental amount (interest payment) of one upcoming installment shall always be available. In addition, AGP is providing a corporate guarantee for the entire principal amount of the Sukuk.

Ratings assigned take into account the inelastic demand nature of the product portfolio being acquired along with high relative market share and brand value enjoyed by major products (few well-known brands are Azomax, Amoxi-Clav, Zatofen, Sirdalud, Axcin and Paclitaxel EBW). Ratings also factor in concentration in product portfolio and therapeutic area coverage. Business strategy for the medium-term is aligned to focus on increasing market penetration through focused marketing and sales efforts.

Ratings remain dependent on realization of projected sales and cash flows in order to ensure sound debt servicing ability while maintenance of adequate liquidity buffer is considered important. Nevertheless, comfort is drawn from sponsor’s (AGP) established market position, long track record in the pharmaceutical industry and the resulting operational, managerial and financial support available to the SPV (Both from AGP and cash available at the holding Company level).

For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873

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