Press Release
JCR-VIS assigns preliminary rating of A- to proposed Sukuk of Quetta Textile Mills Limited
Karachi, March 31, 2008: JCR-VIS Credit Rating Company Limited has assigned preliminary medium to long term rating of A- (Single A Minus) to the proposed Sukuk of Rs 1 billion (with additional green shoe option of Rs. 0.5 billion) of Quetta Textile Mills Limited (QTML). The outlook on the rating is ‘Stable’. The preliminary Sukuk rating will be converted into final rating on review of the signed legal documents incorporating the structure of the transaction.
The assigned ratings take into account QTML’s long history in the textile industry and management’s policy of continuous up-gradation of plant and equipment. This has, however, also resulted in high debt leverage for the company as well as debt servicing pressure which is mitigated through the proposed structure of the transaction. The said structure entails a corporate guarantee of Rs. 200m from at least an ‘A’ rated financial institution and standby credit lines, also from an ‘A’ rated financial institution, for each upcoming installment payment. The proposed Sukuk will be issued for a term of seven years inclusive of one year grace period on principal repayment which will subsequently be redeemed in 12 unequal semi annual tranches with markup payable semi annually in arrears.
We are closely following the results reported by the textile industry in FY2008 which is turning out to be a tight year for the industry with high cotton prices which are not offset by commensurate yarn prices due to intense competition in the global markets. The ratings would be under surveillance during the period of the contract and JCR-VIS will be monitoring any changes in the risk profile of the company for possible impact on the assigned ratings.
For further information on this rating announcement, please contact Mr. Mustafa Ahmad (mustafa@jcrvis.com.pk) at 021-5311861 or fax to 021-5311873.
Faheem Ahmad
President & CEO