Press Release

JCR-VIS revises rating of BRR Guardian Modaraba to A-

Karachi, November 03, 2009: JCR-VIS Credit Rating Company Limited (JCR-VIS) has revised the entity rating of BRR Guardian Modaraba (BGM) from ‘A/A-2’ (Single A/ A-Two) to ‘A-/A-2’ (Single A Minus/ A-Two). Rating of the privately placed musharikah TFCs has also been revised from ‘A+’ (Single A Plus) to ‘A’ (Single A). Outlook on the assigned ratings is ‘Stable’.

Financial year 2009 was characterized by extreme economic turmoil both internationally and locally coupled with continuing political turmoil in Pakistan. This crisis triggered fall in exports and foreign investment; rising inflation in prices of factors of production and markup rates; increasing infection in domestic credit; liquidity crunch in the financial sector and fall in asset prices and liquidity of all major asset classes including real estate, debt instruments and stocks. Operating in this environment poses a significant challenge to market participants like BGM who rely on secondary market sources of funding and cater to mid-tier corporate clientele.

BGM has suffered from increase in delinquencies and fall in value of investments on account of the downward spiral witnessed in Karachi Stock Exchange. With increase in provisioning against assets and income suspension against infected exposures, BGM reported a considerable loss for the outgoing year. This has led to a notable fall in the level of capitalization and BGM’s loss absorption capacity; also resulting in an increased leverage, which has historically been maintained below 2.0x.

Liquidity profile of the modaraba has also been traditionally sound with current ratio maintained well above 1x. While cash flow from operations are still positive, liquidity position has been affected by fall in asset values and distress at another associate concern, during FY09, which triggered withdrawal pressure on BGM’s funding lines. In the face of these challenges, the modaraba has adopted a consolidation strategy with slowdown in fresh financing activity and utilizing funds from maturing financing to reduce debt burden.

BGM has been able to post some improvement in 1Q10 on account of better returns on investments; nevertheless, growth in business volumes is still constrained. JCR-VIS will continue to closely monitor BGM’s performance and portfolio quality trends going forward.

For further information on this rating announcement, please contact Ms. Sabeen Saleem (Ext: 510) or Mr. Safdar Kazi (Ext: 501) at (+92-21) 35311861-70 (10 lines) or fax to (+92-21) 35311872-73.



Faheem Ahmed
President & CEO

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 2009 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .