Press Release
VIS reaffirms Entity ratings of Superhighway Construction Operation and Rehabilitation Engineering (Pvt.) Limited
Karachi, April 02, 2021: VIS Credit Rating Company Limited has reaffirmed entity ratings of Superhighway Construction Operation and Rehabilitation Engineering (Pvt.) Limited (SCORE) at ‘AA-/A-1’ (Double A Minus/A-One). Long term rating of ‘AA-’ signifies high credit quality, and strong protection factors. Risk is moderate but may vary slightly from time to time because of economic conditions. Short term rating of A-1 denotes high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on October 30, 2019.
Superhighway Construction, Operation & Rehabilitation Engineering (Private) Limited (SCORE) has been primarily formed for conversion of 4-lane Karachi-Hyderabad Superhighway into 6-Lane motorway (M-9) on build, operate and transfer basis. The company has entered into a concession agreement with National Highway Authority (NHA) for a period of 25 years starting March 2015. Toll collection from the road commenced in June 2018.
The assigned ratings reflects strategic importance of the M-9 motorway which offers various savings to commuters including lower vehicle operating cost, lesser time and distance, which are not available in the alternative route. Ratings also incorporate sound profile of the sponsor, Frontier Works Organization (FWO), which holds 100% shares of the company. Experience of FWO in managing similar infrastructure projects in the past, and presence of sponsor’s irrevocable and unconditional standby guarantee in favor of SCORE for debt repayments, have been taken into consideration in the rating assessment.
In FY20, the profitability and cash flow coverage indicators of the company came under stress, as the pandemic-induced slow down translated in lesser commercial traffic, thus affecting toll collection. The DSCR has become aligned with the threshold, subsequent to the reclassification of debt, in accordance with the waiver on specific covenants provided by the lender. Financial performance in FY21 has depicted significant improvement, as economic growth picked pace. Accordingly, the cash flow coverage indicators for FY21 are expected to be comfortably high. Cash outflows in the rating horizon are limited albeit are expected to rise over the longer term, ahead of FY24-25 as the highway will require a layover after 7 years of operations. Going forward, the growth in traffic volumes and revenue are considered important from rating perspective.
For further information on this rating announcement, please contact Arsal Ayub (Ext: 216) or the undersigned (Ext: 213) at 021-35311861-70 or fax to 021-35311873.
Faryal Ahmed Faheem
Deputy CEO
Applicable Rating Criteria: Toll Roads (August 2020)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/TollRoads202008.pdf
Industrial Corporates (April 2019)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.pdf