Press Release

VIS Maintains Entity Ratings of Union Fabrics (Private) Limited

Karachi, April 24, 2020: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Union Fabrics (Private) Limited (UFPL) at ‘A-/A2’ (Single A Minus/A-Two). The assigned ratings have been placed on ‘Rating Watch-Developing’ status. Long Term Rating of ‘A-’ reflects good credit quality with adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A2’ signifies good certainty of timely payment, sound liquidity factors and company fundamentals, and good access to capital markets. Risk factors are small. Previous rating action was announced on December 17, 2019.

UFPL currently operates in the home textiles, processing and value added business lines in addition to weaving. Capacity utilization levels of sizing, weaving, stitching and processing segments continued to rise and stood above 90% during the outgoing fiscal year. Net sales increased by 14% in FY19 with growth emanating from higher export as well as local sales. Equity injection planned by sponsors during ongoing fiscal year will support capitalization levels of the company. Assigned ratings remained constrained by high leverage indicators, although the same have improved on a timeline basis. Despite planned equity injection, leverage indicators are projected to remain high on account of debt drawdown to fund capex in the ongoing fiscal year. Cash flow coverage of outstanding long term debt and debt servicing coverage remain adequate.

The revision in rating outlook reflects prevailing uncertainty in textile sector dynamics due to coronavirus outbreak, prolonged lockdown, overall contraction in demand and challenging economic environment. It is expected that the entire value chain of the textile industry will be impacted by these developments. Status of the assigned rating is therefore uncertain as an event of deviation from expected trend has occurred; additional information will be necessary to take any further rating action, warranting a ‘Rating Watch-Developing’ status. Given the capital structure and financial profile, it is expected that ratings will remain stable post recovery of the ongoing situation; nevertheless as scenario is evolving rapidly, VIS will closely monitor and will accordingly take action to resolve the outlook status.

For further information on this rating announcement, please contact Mr. Muhammad Ibad Desmukh (Ext: 205) or the undersigned (Ext: 306) at (021) 35311861-66 or email at info@vis.com.pk.




Faryal Ahmad Faheem
Deputy CEO

Applicable Criteria: Industrial Corporates (May 2019)
http://vis.com.pk/kc-meth.aspx

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