Press Release

VIS Reaffirms Facility Rating of Avari Hotels (Pvt.) Limited

Karachi, May 30, 2022: VIS Credit Rating Company Ltd. (VIS) has reaffirmed the rating assigned to the facilities mobilized by Avari Hotels (Pvt.) Limited (AHL) amounting to Rs. 4.3b (Rs. 2b of Islamic Musharaka and Rs. 2.3b of conventional financing) at ‘AA’ (Double A). The assigned rating signifies high credit quality with strong protection factors. Risk is considered moderate but may vary slightly from time to time because of economic conditions. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on June 09, 2021.

This facility has been 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 5years. 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 ratings draw 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 (Unilever), 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.

Financial assessment of the Company in FY21 reflects that the topline of the company has decreased on account of lower occupancy levels amidst Covid-19 pandemic in the outgoing year. However, with improved global conditions, occupancy rate has jumped back to 70% in the ongoing year resulting in improved profitability profile of the company. However, leverage indicators remain elevated on account of equity erosion, resulting from losses in FY21.While liquidity indicators were impacted, improved profitability in the ongoing year is expected to revert them back to satisfactory levels.
For further information on this rating announcement, please contact Ms. Asfia Aziz or the undersigned (Ext: 201) at (021) 35311861-66 or email at

Javed Callea

Applicable Rating Criteria: Industrial Corporates (August 2021)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited