Press Release
VIS Maintains Ratings of Basel 3 Compliant Tier-II (TFC-I) Instrument of Khushhali Microfinance Bank Limited
Karachi, May 30, 2024: VIS Credit Rating Company Limited (VIS) has maintained the rating assigned to TFC-I (Basel 3 Compliant Tier-II debt instrument) of Khushhali Microfinance Bank Limited (‘KMBL’ or the ‘Bank’), at ‘B’ (Single B). The long-term instrument rating of ‘B’ denotes payments are not being made as per original schedule. Future performance is less likely. ‘Rating Watch – Negative’ has been removed and a ‘Negative’ outlook has been assigned on the rating. The previous rating action was announced on August 18, 2023.
The Bank has raised Rs 1.0 billion through rated, unsecured, subordinated and privately placed term finance certificates of worth Rs 100,000 each fully subscribed on March 19, 2018 to improve capital adequacy at the rate of 6 month KIBOR plus 2.05% per annum. The issue is for a period of 8 years from the date of subscription and mature on March 19, 2026. The issue has call option after 10th redemption date including lock-in and loss absorbency clause. The principal will redeemed in two equal semiannual installments falling on the end of 90th month and 96th month from the date of issue.
The assigned instrument rating takes note of the lock-in-clause having been invoked by SBP and resulting in missed coupon payment instances. With Capital Adequacy Ratio (CAR) breach continuing, further missed payments on coupons may occur. Therefore, the risk of conversion of both instruments into common equity remains high.
For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria:
Micro-Finance Banks
https://docs.vis.com.pk/docs/MicroFinance-Oct-2023.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf