Press Release

VIS Assigns Final Rating to Sukuk 2 Issue of OBS Pakistan (Private) Limited

Karachi, February 28, 2024: VIS Credit Rating Company Ltd. (VIS) has assigned final rating of ‘A+’ (Single A plus) to the Sukuk issue of Rs. 2.9b of OBS Pakistan (Private) Limited (OBS-Pak). Rating of ‘A+’ signifies good credit quality with adequate protection factors. Risks may vary with possible changes in the economy. Outlook on the assigned rating is ‘Stable’. Previous ratings action was announced on September 25, 2023.

OBS-Pak, a subsidiary of AGP Limited (AGP), was established as a Special Purpose Company (SPC) to acquire a portfolio of pharmaceutical products from Viatris Inc. and Pfizer Inc. The Company has acquired 17 pharmaceutical brands at an estimated cost of Rs. 9.3b. The acquisition is to be funded through a debt equity ratio of 75:25. The Company has already raised Rs. 3.6b through its first Sukuk issuance, while an additional Rs. 2.9b has been raised through the issuance of a second Sukuk.

The Company's Sukuk 2 is a Rs. 2.9b issue, with a 7-year tenor and 18-month grace period. Issuance date of the Sukuk is 29th November 2023. It carries a profit rate of 3M KIBOR plus a 1.60% spread, with principal payments spread over 22 quarters. Profit payments will also be made quarterly, with the first payment due 3 months from disbursement. Security structure includes a mortgage/hypothecation charge on AGP's fixed assets with a 20% margin in favor of the investment agent, corporate guarantee of AGP for the outstanding amount plus profit, and pari passu lien and right of set-off over the Collection Account – Sukuk I. This is in addition to joint pari passu lien right of set-off over the Collection Account – Sukuk II, in favor of the investment bank, and all rights and receivables are assigned in favor of the investment bank. The Sukuk Payment Account (SPA), under the Security Agent, is to be filled with the upcoming installment amount two working days before the due date, resetting to zero after each settlement.

Assigned rating take comfort from the Parent Company’s (AGP Limited) 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 from the overall group strength). Furthermore, business risk profile is supported by non-cyclical nature of the industry and steady demand growth.

Rating takes into account the Company's strong market positioning with its top products, holding substantial market share across various therapeutic areas. While the concentration risk in the portfolio is acknowledged, their established market presence mitigates concerns. Furthermore, despite early challenges in the first five months of operation the management expects recovery through price adjustments, increased volumes, and supply chain stabilization going forward. With regards to liquidity, capitalization and coverage profile, the Company's performance is projected to improve as revenue generation from the acquired portfolio gains momentum and cash flows strengthen. Going forward, the rating will remain sensitive to achievement of projected plans, including effective liquidity management, leverage reduction, and enhanced debt servicing capacity. Rating remains underpinned on corporate guarantee provided by the parent AGP Limited.

For further information on this rating announcement, please contact Mr. Saeb Muhammad Jafri (Ext. 202) or the undersigned (Ext. 207) at 021-35311861-70 or fax to 021-35311873.





Sara Ahmed
Director


Applicable Rating Criteria: Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
Applicable Rating Criteria: Rating the Issue
https://docs.vis.com.pk/docs/Rating-the-Issue-Aug-2023.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .