Press Release

VIS Reassigns Preliminary Rating to Proposed Sukuk of OBS Pakistan (Private ) Limited

Karachi, April 18, 2023: VIS Credit Rating Company Ltd. (VIS) has reassigned preliminary rating of ‘A+’ (Single A plus) to the proposed Sukuk issue of Rs. 3.6b to OBS Pakistan (Private) Limited (OBS-Pak). Rating of ‘A+’ signifies good credit quality with adequate protection factors. Risk may vary with possible changes in the economy. Outlook on the assigned rating is ‘Stable’.

OBS- Pak, a Special Purpose Vehicle (SPV) and subsidiary (presently 67.57% and ultimately 85%) of AGP Limited (AGP), was formed to execute an asset purchase agreement with Viatris Inc. and Pfizer Inc. OBS-Pak has negotiated certain revisions to their earlier agreements, whereby now 17 pharmaceutical brands of Viatris Inc., currently marketed by Pfizer Inc. are being purchased, for which capital commitments have been revised to Rs. 9.6b from Rs. 12.9b previously. The same are to be financed through a 75:25 Debt: Equity ratio.

Assigned rating take comfort from the Parent Company’s (AGP) established market position, long track record in the pharmaceutical industry and the resulting operational, managerial and financial support available to OBS Pakistan (Both from AGP and projected cash available at the holding Company level). Furthermore, business risk profile is supported by non-cyclical nature of the industry and steady demand growth.

The Company intends to raise up to Rs. 3.6b for the acquisition through a Sukuk issue having a tenor of 7 years (including 18 months grace period). Principal amount will be redeemed through 22 consecutive, fixed, quarterly installments with quarterly profit payment frequency. Security structure of the Sukuk entails exclusive hypothecation charge on future fixed assets of OBS-Pak, shares of AGP, Corporate Guarantee from AGP for the Principle and Profit amount, revenue collection account and finance payment account. Rating of the instrument is notched up backed by AGP providing a corporate guarantee for the entire amount of the Sukuk (principal and profit).

Rating assigned takes into account the inelastic demand nature of the product portfolio being acquired along with high relative market share and brand value enjoyed by major products (top three include- Norvasc, Zoloft, Lipitor). Ratings also factor in concentration in product portfolio and therapeutic area coverage. Gradual growth in profitability indicators is expected on the back of expected increase in prices and uptick in volumetric sales planned through organic growth of current portfolio along with line extensions over the rating horizon, however, margins remain exposed to currency volatility. Rating incorporate adequate debt servicing over the rating horizon, further supported by corporate guarantee. Liquidity indicators also depict improvement in the long run. Projected profit retention and annual repayments are expected to result in improvement in gearing and leverage indicators. Ratings remain sensitive to continued availability of corporate guarantee, maintenance of sound debt servicing cushion and reduction in leverage indicators in line with projections over the rating horizon.

For further information on this rating announcement, please contact the undersigned (Ext. 207) at 021-35311861-70 or fax to 021-35311873.

Sara Ahmed

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

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