The Pakistan Credit Rating Agency Limited
Press Release
a

Rating Action
Lahore: (24-June-2005)
   

PACRA Upgrades Entity and TFCs Ratings of Al-Abbas Sugar Mills Limited (AASML)
 

 
Analyst
Ambreen Irfan
(+92-42-586 9504)
ambreen@pacra.com

 

 

 









 

 

 



 

 

 

 

Disclaimer
This press release is transmitted to you for this sole purpose of dissemination through your newspaper/magazine/agency. The press release may be used by you in full or in part without changing the meaning or context thereof but with due credit to PACRA. However, PACRA has the sole right of distribution of its press releases for consideration or otherwise through any media.

  

The Pakistan Credit Rating Agency (PACRA) has upgraded the long-term and short-term entity ratings of Al-Abbas Sugar Mills Limited (AASML) to “A” (Single A) and “A1” (A One) respectively. These ratings are applicable to the senior unsecured creditors of the bank. The rating of AASML's secured TFC issue of PKR 350mln has been upgraded to “A+” (single A plus). These ratings denote a low expectation of credit risk and a strong capacity for timely payment of financial commitments.

AASML's ratings reflect sustained positive performance trends despite the volatile nature of the sugar industry. The company's financial performance continues to benefit from the increasing proportion of high-margin, lower-risk distillery revenues. The ratings also factor in the company's enhanced propensity to absorb risk on the back of a further strengthening of its capital structure.

About the TFC Issue: The company issued a secured TFC of PKR. 350mln in 4QFY03 to facilitate expansion in its distillery unit as well as for debt substitution. The instrument is privately placed with a tenor of 5 years at a rate of the 3 month T-Bill rate +3.25%p.a with a floor of 6% and a ceiling of 13%. Principal redemption will be in eighteen equal quarterly installments after an initial grace period of six months . The issue is secured by first pari passu charge on the fixed assets including plant and machinery with 25% margin, in addition to personal guarantees of sponsor directors. Considering the secured nature of the instrument, it has been assigned a one-notch higher rating than the entity rating.

About the company: Al-Abbas Sugar Mills Limited (AASML), listed on the Karachi Stock Exchange, was incorporated in May 1991. The company operates a sugar plant and Industrial Alcohol Distillery (IAD) located in Mirpurkhas, a district of Lower Sindh. Recognising the risk inherent in sugar operations, the company expanded its distillery operations in FY 03-04. Distillery revenues, therefore, formulate an increasing proportion of the company's turnover. The company's sponsors have more than 50% shareholding. The management, with a good blend of youth and experience, have a track record of efficient operations and a strategic vision. The Al-Abbas Group, which includes four manufacturing concerns, benefits from its close association with the Jahangir Siddiqui (JS) Group. The JS Group has a 22 % shareholding in AASML, and is fast emerging as a major conglomerate with an increasingly diverse asset base.
 
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity.

PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings.

PACRA's opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.

 

    
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