The Pakistan Credit Rating Agency Limited
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Ayesha Qasim

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PACRA Maintains Entity Ratings of Pak-Libya Holding Company (Pvt.) Limited

Rating Type Entity
(18-Dec-17 )
(23-Jun-17 )
Action Maintain Maintain
Long Term AA- AA-
Short Term A1+ A1+
Outlook Negative Negative
Rating Watch - -

The ratings of Pak Libya reflect the sovereign parentage - jointly owned by Governments of Pakistan and Libya. However, so far, this strength has not translated fully in supporting the entity in meeting deficiency in its regulatory capital requirement. The approval for further extension in compliance with capital requirement remains dependent upon commitment from sponsoring Governments. Nevertheless, with the organic growth of the company, the gap with minimum capital requirement is gradually being abridged. Benefiting from the increasing credit offtake in the country, lending side of Pak Libya picked up pace along with sustaining the quality. Treasury operations continue to strengthen the financial position of the company; investment in government securities dominates the book with limited exposure in equity market through investments in diversified blue chip stocks. Last year, the Company managed to repossess assets of Kamoki Energy Limited (KEL) – Pak Libya's largest non-performing exposure – a strategic investment on the books. As the exposure was completely provided for, value earned from transfer of assets buffered the equity. Management has applied for power generation license for Kamoke Powergen Limited (KPL: newly formed Company), approvals pending, and eventually plans to sell it off. Although the management is actively pursuing it, with improving energy dynamics, this may be challenging. Operational profitability has been sustained in all three quarters of CY17. The management continues to cautiously expand its existing loan book through corporate finance activities and further penetrating in SME segment while initiating secured consumer financing for corporate employees. The management expects to capitalize on new avenues led by economic activities related to CPEC.

The ratings have a "negative outlook", signifying the need to comply with regulatory minimum capital requirement (shortfall of PKR 1.258bln as at end-Sep17). Consistent efforts by the management to stabilize revenue stream and add further diversity to operations would remain critical. Meanwhile, sustaining asset quality would help maintain the ratings. Timely sell-off of KEL is important for the ratings.

About the Entity
Pak Libya, established as a joint venture institution in 1978, is equally owned by the Government of Pakistan and Libya through SBP and Libyan Foreign Investment Company (LAFICO), respectively. The primary objective of the Company is to promote development of industrial and economic infrastructure of the country, by supporting both industrial and service sectors.

The six-member board has equal representation of both the sponsor countries. The Chairman, Mr. Bashir B. Omer, has worked as an investment banker and has over two decades of experience in management and accounting. Mr. Abid Aziz, the MD, has been associated with the Company since 1983. Mr. Khaled Joma Ezarzor – a representative of LAFICO – is the DMD since April’17. They are assisted by a qualified and experienced team.

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.