Press Release

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

Karachi, June 16th, 2023: 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 (blr)’ (Double A (blr)). 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 May 30, 2022.

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 4 years. 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 (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 FY22 reflects significant improvement in top line of the company on account of improved occupancy and increased room charges. Occupancy rate improved to 65% in the outgoing year compared to 41.66% in FY21, as travel, corporate meetings and conferences resumed post-Covid-19 and demand in the industry began recovering. The Company saw significant improvement in its profitability and liquidity profile during the year, as a result. Debt profile was slightly better over same period last year; however, Avari has secured fresh borrowings for the purpose of renovation of its Lahore facility, which may elevate gearing and leverage of AHL in the medium term.
For further information on this rating announcement, please contact Mr. Saeb Muhammad Jafri (Ext: 202) or the undersigned (Ext: 207) at 021-35311861-64 or email at

Sara Ahmed

Applicable Rating Criteria: Industrial Corporates (May 2023)

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 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .