Press Release

Entity and Bank Loan Ratings of Ghotki Kandhkot Road & Bridge (Private) Limited

Karachi, November 29, 2021: VIS Credit Rating Company Limited has reaffirmed entity ratings of ‘A/A-2’ (Single A/A-2) assigned to GRBC. The long term rating of ‘A’ signifies good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. The short term rating of ‘A-2’ indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. VIS has assigned preliminary bank loan rating (blr) of ‘ÁA (blr)’ (Double A (blr)) to GRBC’s secured bank loan facility planned to be drawn for the construction works on the project. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on October 23, 2020.

GRBC has been established to develop two sections of the road located at Ghotki Kandhkot site of the Sindh province. This Project will connect N-5 and N-55 between Ghotki on one side and Kandhkot on the other side of River Indus and end on existing by-pass of Indus Highway, N-55. Post construction of this road, distance travelled by the commuters would be reduced by two third in comparison to the alternate route, while time travelled would also be reduced by two hours. The project will be established under the Public Private Partnership (PPP) regime on Design, Finance, Build, Operate & Transfer (DFBOT) basis. GRBC has entered into Concession Agreement with Government of Sindh (GoS) for a period of 28 years, out of which construction period is up to three-years and operations and maintenance period is up to twenty-five years. Total project cost is Rs. 14.3b; funded through 70% debt and 30% equity. Financial close has not been achieved yet, and as per the Concessionaire agreement, inability to complete the financial close within 150 days of signing the agreement results in the onus of arrangement of debt funding on Government of Sindh. A revised term sheet has been signed and financial close is expected to be closed by 3QFY22. However, equity funds have been mobilized to ensure timely completion of project expected to be achieved by July 2023.

The assigned ratings incorporate sound profile of sponsors, as shareholding of GRBC is vested with Sachal Engineering Works (Pvt.) Limited (SEWPL) (53%) and Government of Sindh (GoS) (47%). SEWPL will also act as the EPC contractor. SEWPL has considerable experience and sound track record in executing infrastructure projects especially toll roads & bridges. Demand risk, associated with uncertainty in future traffic volumes and toll rates, will not be borne by GRBC as the company will receive fixed annuity payments from the GoS, which will include O&M costs component, tax component, debt component and a fixed Return on Equity (ROE) for the company. Since debt component is included in annuity payments, cushion in debt servicing is satisfactory. Construction risk in the project is present but partially mitigated due to sound track record of the EPC contractor. Cost overrun risk is also inherent but ratings draw comfort from adequate contingency built in the project cost as well as interest savings accrued over the period due to delay in debt drawdown together with sponsors, including GoS, undertaking to fund the shortfall, if any, in equal sharing. Going forward, achievement of financial close, timely completion of key milestones and overall project without any significant cost and time overruns will be the key rating sensitivities.

The Company is seeking the Syndicated Term Finance Facility (STFF) of Rs. 9.82b for a tenor of around 12 years (inclusive of 2 years grace period) at the rate of 3M KIBOR+1.3%. As per the indicative term sheet, security structure entails a Provincial Guarantee in favor of the financiers backed by an unconditional and irrevocable debit authority on the GoS Non-Food Account No. 1 maintained with SBP equivalent to the 50% of the facility amount. The debit authority shall continue at all times over the life of the STFF facility. The annuity payments, which will cover principal and rental payments, will be deposited 105 days prior to debt repayment date. Therefore, at any time during the repayment period, at least one debt payment will be available in debt payment account. More importantly, even in case of concessionaire event of default, debt repayments are committed to be met by the sub-sovereign - GoS under the Concession Agreement.

For further information on this rating announcement, please contact Ms. Asfia Aziz or the undersigned (Ext. 306) at 021-35311861-70 or email at

Faryal Ahmad Faheem
Deputy CEO

VIS Entity Rating Criteria: Industrial Corporates (August 2021)

VIS Rating Criteria: Toll Roads Rating (August 2020)

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 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited