PACRA Assigns Preliminary Rating to U Microfinance Bank Limited | TFC - PKR 5,000mln
|Rating Type||Debt Instrument|
The rating of the TFC reflects the coverage of the instrument through the security structure - 50% of the Issue Amount will be secured against pari passu charge on the Issuer’s Book Debts, Advances and Receivables with 25% margin. Whereas, 50% of the Issue amount is secured against lien on government securities of a similar tenor. In case the Issuer fails to make the Profit/Principal payment on the relevant due date, the Security Agent reserves the right to realize the cash from the government securities placed under lien with the security agent and make payment including principal and interest as falling due to the relevant investor within 05 days of the relevant due date without invoking Event of Default. U Microfinance Bank Limited (UMBL) is a fast growing player in the Microfinance Sector (End-Jun'21: 9.8%, End-Dec'20: 9.3% market share in total Gross Loan Portfolio). The Bank's ambitious growth strategy encompasses multi-faceted targets focused towards achieving growth in the retail banking segment, developing digital banking platform and building a wholesome treasury book. The Bank's funding needs are primarily fostered through a growing deposit base, coupled with sizable borrowings. Sponsor support is reflected by way of conversion of a part of the subordinated debt into Tier-I capital in the form of preference shares of PKR 1bln in Dec-20. Almost half of the Bank’s portfolio is gold backed which provides a strong mitigant against potential credit risk.
COVID-19 is an ongoing challenge. While it has taken a toll on many businesses, its ramifications are still unfolding. The proactive measures taken by the regulators and other concerning bodies have mitigated the potential damages much anticipated from this pandemic. Vigilance is required as the loan repayment cycle remains amid re-emerging variants of COVID-19. Average loan size of the Bank is on the higher side in relation to its peers on account of gold backed lending. The rating is dependent upon the Bank's compliance with the agreed terms.
In 2012, Pakistan Telecommunication Company Limited (PTCL) acquired 100% shareholding of Rozgar Microfinance Bank Ltd which was established in 2003 as a district wide microfinance bank. Henceforth, its name was changed to U Microfinance Bank Limited (UMBL). PTCL itself is co-owned by the Government of Pakistan (62%) and Emirates Telecommunication Group Company (Etisalat) (26%), a state owned Telecom Corporation of UAE. The Board of Directors of UMBL consists of eight directors, comprising representatives of Etisalat, PTCL and Government of Pakistan along with two Independent Directors and one Executive Director. Mr. Burak Sevilengul, the Chairman, has over 24 years of experience. Mr. Kabeer Naqvi, the President & CEO, with two decades of professional experience and has been with the Bank since Sep’15.
U Microfinance Bank will be issuing Rated, Secured, Listed, Term Finance Certificates (TFC) up to PKR 5,000mln. Profit will be 6M KIBOR plus 175bps payable semi-annually in arrears calculated on a 365 day year basis on the outstanding Principal amount. The first such profit payment will fall due six (06) months from the Issue date and subsequently every six (06) months thereafter. The basic purpose of the respective issue is to enhance the advances book which will be fueled by the additional liquidity raised through the TFC.