The Pakistan Credit Rating Agency Limited
Press Release


Mustafa Hassan

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PACRA Maintains Instrument Rating of Pakistan Services Limited | Sukuk | Mar-18

Rating Type Debt Instrument
Action Maintain Initial
Long Term AA- AA-
Short Term - -
Outlook Stable Stable
Rating Watch - -

Ratings reflect Pakistan Services Limited’s (The Company) strong position in the hospitality industry as the market leader drawing comfort from the Company’s association with Hashoo Group. Pakistan Services Limited has witnessed growth over the years (in line with Industry dynamics) amid improving security conditions and progression of CPEC with stable margins. However, on going political scenario impacted the Company's profitability and coverages negatively during 3MFY19. The Company has modest leveraging. Relatively higher borrowings and rising interest rates have put coverages under pressure. This trend is expected to continue till cashflows from new properties start flowing in. The Company has sufficient liquid investments and cash to meet its obligations during FY19. Going forward, the Company is taking cost control measures to improve margins and is making sizable investments in development of new properties which are expected to augment its revenues.

Ratings are dependent on effective implementation of envisaged strategy while maintaining modest leveraging and improving coverages. Any significant delay in commencement of new projects, deterioration in margins/coverages and material dilution in liquid investments (other than debt repayment) will have a negatively impact on ratings.

About the Entity
Pakistan Services Limited was established in 1958 and is quoted on Pakistan Stock Exchange. It owns and operates Pearl Continental Hotels – the largest hotel chain of the country with 1,526 rooms. Major shareholding (~89%) lies with Hashoo Group. The Group is one of the leading business conglomerates of Pakistan and has business interests which span across various sectors both locally and globally.

The Company has a nine member BoD, with one independent member. Mr. Sadruddin Hashwani – founder of the Hashoo Group – chairs the board. He has experience of over 5 decades of managing different businesses. Mr. Murtaza Hashwani acts as the Chief Executive Officer.

About the Instrument
Pakistan Services Limited has issued an unlisted, secured, long-term, privately placed Sukuk amounting to PKR 7,000mln (inclusive of green-shoe option of PKR 2,000mln). The bond has a tenor of six years from the date of issue with a grace period of 18 months. The bond is secured with the present and future immovable assets of PC Lahore with 25% margin. Profit rate is payable at 6M-KIBOR + 100 basis points and is to be paid semi-annually in arrears, whereas, principal payment is to be paid in nine semi-annual installments from the expiry of the grace period. The Company issued its first tranche (PKR 2,333mln) in March 2018 and the second (PKR 1,362mln) in July 2018. Principal repayment will be due in March 2020.

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 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.