VIS Maintains Entity Ratings of Allied Rental Modaraba on ‘Rating Watch – Developing’

Karachi, August 07, 2023 (PPI-OT): VIS Credit Ratings Company Ltd. (VIS) has maintained entity ratings of ‘A+/A-1’ (Single A Plus/A-One) to Allied Rental Modaraba (ARM). Medium to long-term ratings of ‘A+’ signifies good credit quality with adequate protection factors. Risk factors are considered variable if changes occur in the economy. Short term ratings of ‘A-1’ denote high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors; risk factors are minor. Outlook on the assigned ratings is ‘Rating Watch - Developing’. The previous rating action was announced on June 17, 2022.

Ratings continue to be on Rating Watch-Developing on account of pending demerger. The demerger, announced on April 14, 2022, is currently awaiting approval from the Sindh High Court. It involves the transfer of assets, liabilities, and obligations from ARM's rental business segment and logistic business segment to two separate companies. The demerged rental business segment's assets, liabilities, and obligations will be transferred to Allied Engineering Management Company (Private) Limited (AEMCL), which will subsequently change its name to Allied Rental Services (Private) Limited (ARSL). Similarly, the assets, liabilities, and obligations related to the demerged logistic business segment will be transferred to Allied Transport and Logistics (Private) Limited (ATL).

As part of this arrangement, shares of AEMCL and ATL will be issued to the certificate holders of ARM according to the swap ratio calculated for the purpose of this scheme. Principal sponsors, who indirectly hold more than 90% certificates of ARM, will be issued shares of AEMCL and ATL in proportion to their indirect investment in ARM. The ultimate objective of demerger of ARM is to carry on business economically and efficiently with main sponsors being able to reduce their tax burden by directly holding shares of the two companies. Upon finalization of the demerger scheme, VIS will review the ratings.

Assigned ratings take into account the Company being a subsidiary of Allied Engineering and Services (Pvt) Limited (AESL); the latter is the market leader in generator business. The implicit support available from AESL, the authorized dealer of Caterpillar (CAT) products in Pakistan, remains a key rating driver. The ratings are underpinned by sound financial risk profile of the Company emanating from relatively conservative capital structure, low leverage indicators, adequate liquidity and maintained asset quality.

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

Email: bilal@jcrvis.com.pk

Website: https://www.vis.com.pk/

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