Press Release

JCR-VIS revises entity rating of BRR Guardian Modaraba to BBB

Karachi, June 23, 2010: JCR-VIS Credit Rating Company Limited (JCR-VIS) has revised the entity rating of BRR Guardian Modaraba (BGM) from ‘A-/A-2’ (Single A Minus/ A-Two) to ‘BBB/A-3’ (Triple B/ A-Three). Rating of the privately placed musharikah TFCs has also been revised from ‘A’ (Single A) to ‘BBB+’ (Triple B Plus). Outlook on the assigned ratings has been revised from ‘Stable’ to ‘Negative’. JCR-VIS had previously downgraded the entity rating of BGM to ‘A-/A-2’ from ‘A/A-2’ and rating of privately placed musharikah TFC to ‘A’ from ‘A+’ on November 3, 2009 at the onset of the problems being currently faced by the modaraba.

The prevalent economic imbalances have continued to affect performance of the manufacturing and services sectors leading to rising trend in delinquencies and low private sector credit off-take, which has in turn affected the performance of companies in the NBFCs and modaraba sectors having limited capital and reliance on secondary market sources of funding.

In line with these trends BGM has also suffered significant erosion of capital due to continuing losses. The company has faced rising cost of funding; dip in revenues and high level of delinquencies against financing portfolio and investments. Despite some provisions against debt securities being booked during the year, the portfolio still comprises a notable proportion of un-provided non-performing fixed income securities. Decrease in equity has also led to increase in leverage to historically high levels. There has also been a decline in operational cash flows and level of liquidity vis-à-vis funding requirements for payment of current liabilities and construction of Dawood Islamic Tower. Financial distress at an associated concern has also impacted the franchise of the group, which has in turn affected BGM’s access to funding.

JCR-VIS understands that the timeline for completion of the Dawood Islamic Tower project is expected to be pushed back by a few months beyond the previously targeted December 2010 deadline. With principal redemption commencing from January 2011, this delay may lead to increased stress on timely repayment capacity of the musharikah TFC. JCR-VIS will continue to monitor the company and ratings may be revised further in the light of developments taking place in the company and the economic environment.

For further information on this rating announcement, please contact Ms. Sabeen Saleem (Ext: 510) or Mr. Javed Callea (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 2010 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .