Press Release

JCR-VIS Maintains Entity Ratings of Grays Leasing Limited

Karachi, October 22, 2013: JCR-VIS Credit Rating Company Limited has maintained the entity ratings of Grays Leasing Limited (GLL) at ‘BB-/B’ (Double B Minus)/(Single B).

GLL remains non-compliant with minimum equity requirement as stipulated by the Securities & Exchange Commission of Pakistan (SECP). SECP granted forbearance period to the company to meet equity requirement that also expired in July 2011 and further extension has not been given in this regard. The company has also been restricted to mobilize fresh deposits/rollover of existing deposits without prior consent and approval of SECP. The breach of minimum equity requirement has raised doubts about the company’s ability to continue as a going concern.

SECP had setup a Non-Bank Financial Sector Reform Committee for revamping the NBFCs sector. The committee, in its report, has proposed that minimum equity requirement of Rs. 50m be introduced for non-deposit taking leasing companies. Any decision in this respect has yet to be taken by the Commission.

Business volumes of GLL have been on a decline since 2008. Given the high incidence of non-performance in lease portfolio and lack of access to fresh funding, the management has been focusing primarily on recoveries against overdues. Simultaneously, fixed assets of the company have also been disposed off to settle outstanding borrowings.

The company was able to retire all outstanding bank borrowings during FY13. The cash inflow from recoveries/rentals and lease key money was sufficient to repay all obligations pertaining to financing and operating expenses. GLL availed unsecured loan from associated company at a subsidized rate. The company also booked selective fresh lease contracts, albeit of small magnitude, during FY13. With lower financial charges and rationalization of operational expenses, the company was able post nominal profit during FY13. In view of the above, Outlook on the rating has been revised from ‘Negative’ to ‘Stable’.

For further information on this rating announcement, please contact Ms. Sobia Maqbool, CFA at 021-35311861-70 or Mr. Maimoon Rasheed at 042-36610681 or fax to 021-35311873.


Javed Callea
Advisor

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 2013 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .