Press Release
VIS Reaffirms Bank Loan Rating (BLR) of Avari Hotels (Pvt.) Limited
Karachi, August 1, 2025: VIS Credit Rating Company Limited (VIS) reaffirms medium to long term BLR rating of Avari Hotels (Pvt.) Limited (‘’AHPL’’ or ‘’the Company’’) at 'AA (blr)' (Double A). Medium to long-term rating of 'AA' indicates high credit quality; Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. Outlook on the assigned rating remains Stable. Previous rating action was announced on August 8, 2024.
AHPL is engaged in the hospitality sector for more than five decades. AHPL owns and manages two five-star hotel properties in Pakistan, namely ‘Avari Towers Karachi’ (AT) and ‘Avari Lahore’ (AL). Avari Towers Karachi is a 225-room property, which began operations in 1985. Avari Lahore commenced operations in 1978 and has a room count of 186. In order to cater to the mid-tier clientele, the Company also manages boutique hotels under the brand name Avari Xpress (AX) in Islamabad, Multan, Faisalabad, Lahore and Avari Boutique Multan and Gilgit; the properties for these hotels have been acquired under lease contracts. AX has 525 rooms at end-June’24.
This facility was acquired from two banks, Meezan Bank Limited (Rs. 2b) and Industrial & Commercial Bank of China Limited (Rs. 2.3b) in October 2019. Remaining tenor of each facility is 1 year and 9 months. Proceeds from the facility were partly utilized for expanding the properties, while the remaining portion was used for retiring other debts on the books. The assigned rating draws comfort from the payment structure of the facility. Although this loan is present on the books of AHL, it is being serviced by one of AHL’s tenant, Unilever Pakistan Limited, one of the largest FMCG operating in Pakistan for a number of decades. Unilever’s parent company, Unilever PLC, carries an international long-term rating of ‘A+’ by Standard & Poor’s. Unilever has been a tenant of AHL for more than 35 years. The facility, agreed upon by AHL and Unilever, is structured as an advance discounting of the lease rental agreement for nine years. The security structure is tripartite [lenders, AHL and Unilever] with Unilever giving an undertaking to pay principal and markup payment against rent payable in lieu of advance rent they would have ordinarily paid. Hence, the current rating of the facility depends upon financial strength of Unilever and the lease agreement between AHL and Unilever; any changes in the financial profile of the lessee would have an impact on rating. The facility is additionally secured by a charge on assets of AHL and personal guarantee of sponsors.
While AHPL’s operational performance has reflected fluctuations in occupancy and margins, the debt servicing remains insulated from these trends due to the structure of the financing arrangement. The rating remains underpinned by the creditworthiness and contractual commitment of Unilever, which continues to support the timely repayment of the facility until its maturity.
For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf
VIS Rating Criteria – Bank Loan Rating
https://docs.vis.com.pk/Methodologies%202024/BLR112018.pdf