Press Release

VIS Places Entity Ratings of Allied Rental Modaraba on ‘Rating Watch - Developing’ Status

Karachi, June 17, 2022: VIS Credit Rating Company Limited has maintained the entity ratings of ‘A+/A-1’ (Single A Plus/A-One) assigned to Allied Rental Modaraba (ARM). The ratings have been placed on ‘Rating Watch - Developing’ status. The long-term rating of ‘A+’ signifies good credit quality with adequate protection factors. Risk may vary slightly from time to time because of economic conditions. Short-term rating of ‘A-1’ depicts high certainty of timely payment where liquidity factors are excellent and supported by good fundamental protection factors. The previous rating action was announced on June 11, 2021. The ratings assigned to ARM take into account the company being a subsidiary of Allied Engineering & Services (Pvt) Limited (AESL); the latter is the market leader in generator business. The implicit support available from AESL, the authorized dealer of Caterpillar (CAT) products in Pakistan, remains a key rating driver. The ratings are underpinned by sound financial risk profile of the company emanating from relatively conservative capital structure, low leverage indicators, adequate liquidity and maintained asset quality. Placement of ratings on Rating Watch is on account of the scheme of demerger announced on April 14, 2022. The undertaking involves the transfer of assets, liabilities, and obligations of rental business segment and logistic business segment of ARM to two companies. Assets, liabilities, and obligations of the demerged rental business segment will be transferred to Allied Engineering Management Company (Private) Limited (AEMCL). Besides, the name of AEMCL will be changed as Allied Rental Services (Private) Limited (ARSL). Assets, liabilities, and obligations pertaining to the demerged logistic business segment will be transferred to Allied Transport and Logistics (Private) Limited (ATL). As part of this arrangement, shares of AEMCL and ATL will be issued to the certificate holders of ARM according to the swap ratio calculated for the purpose of this scheme. Principal sponsors, who indirectly hold more than 90% certificates of ARM, will be issued shares of AEMCL and ATL in proportion of their indirect investment in ARM. The ultimate objective of demerger of ARM is to carry on business economically and efficiently with main sponsors being able to reduce their tax burden by directly holding shares of the two companies. For further information on this rating announcement, please contact Ms. Asfia Aziz or the undersigned (Ext. 207) at 92-21-35311861-70 or email at Sara Ahmed Director Applicable rating criterion: Non-Bank Financial Companies (March 2020)

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