PACRA Assigns Rating to Multinet Pakistan (Pvt.) Limited | Digital Infrastructure Facility | PKR 2100 mln

The Loan facility involves three parties: Multinet Pakistan (Private) Limited as the Customer, Habib Bank Limited as the Bank, Security Agent, and Intercreditor Agent, and InfraZamin Pakistan Limited as the Guarantor. The contract establishes a tri-party relationship among these entities. The Customer has availed financing to the extent of PKR 2.1bln, from the Bank and the Guarantor has guaranteed 75% of the outstanding portion of the finance facility. The proceeds of the facility will be utilized by the Company for funding its expansion plans including addition of 225 data centre racks, long haul capacity expansion from 12.5 Gbps to 200 Gbps, fiber footprint, and tower fiberization. In addition, 25% of cellular traffic and 50% of financial market traffic runs through Multinet Pakistan Pvt. Limited. The Facility is secured through various means, including a Pari Passu hypothecation charge on the Company's present and future movable fixed assets with a minimum 25% margin. Multinet’s financial risk profile is characterized with low leveraged capital structure represented through a debt-to-capital ratio of ~25.3% as at CY22 (3MCY23: 25%). The net profit margin has decreased to 1.4% in 1QCY23 (CY22: 6.3%). While working capital (CY22: ~52 days | 3MCY23: ~81 days) remains stretched in terms of gross working capital. InfraZamin Pakistan Limited leverages the prior experience of InfraCo Asia and GuarantCo in supporting infrastructure projects in Pakistan, as well as Karandaaz’s local market knowledge and track record of investments focused on supporting financial inclusion. IZP has been assigned the long-term rating of “(AAA)” by PACRA.
The given rating is based on the financial risk profile of the borrower as well as the reputation of the Guarantor. Further, the Guarantor has thoroughly secured the credit risk on the transaction and sufficient monitoring mechanism have been deployed to proactively anticipate and avert any deterioration in account even before a default mechanism is triggered. Specific contracts and receivables of the Borrower are assigned and routed through a designated Escrow Account at Habib Bank Limited, with a Lien over and set-off rights on the Escrow Account. Additionally, 100% of the Borrower's shares are pledged, and all rights under Borrower insurance arrangements are assigned, with the Sponsor providing a Personal Guarantee. To bolster security, a proposed cash sweep mechanism on Multinet's collection account at Habib Bank Limited safeguards against DPA funding shortfalls.

About the Entity
Multinet Pakistan (Pvt.) Limited was incorporated in 1996, as a private limited company. Primary business activity of the Company is to provide telecommunications infrastructure and services. Mr. Adnan Asdar Ali is a major shareholder, having a 99.9% stake. Whereas, Mr. Adnan Hayat Zaidi heads the Company as the CEO. The product slate of the Company comprises provision of broadband & data connectivity related services to corporates, long-haul and metro optical fiber infrastructure requirements for telecom operators, international voice termination, fixed line telephony, and partnering with global carriers to provide broadband and data connectivity solutions to their customers operating in Pakistan.

About the Instrument
The tenor of the facility will be 7 years with 24 quarterly stepped-up principal installments of which the first such installment shall fall due after 3 months from the end of the Grace Period.