Pakistan Credit Rating Agency Limited upgrades ratings of Structured TFCs (Azm Certificates II and III) issued by K-Electric Limited

Lahore, June 05, 2015 (PPI-OT): The Pakistan Credit Rating Agency Limited (PACRA) has upgraded the ratings of outstanding secured, listed TFC II of PRK 1,200mln and TFC III of PKR 500mln issued by K-Electric Limited (KE) to ‘AA+’ (Double A Plus) [previous: AA]. These ratings denote a very low expectation of credit risk emanating from a very strong capacity for timely payment of financial commitments.

The ratings reflect demonstrated history of timely repayments of outstanding retail TFCs – Azm – issued by KE. Strong security structure of instruments outline that TFC holders have a first pari passu charge on bills receivable from two sets (core and additional) of carved out consumers. The bill collection ratio of these sets is strong. A minimum throughput of 1.2x is to be maintained from receivables of carved out consumers – 250 specific entities (core) and 495 specific entities (additional).

The amounts received are directly deposited into Debt Payment Account (DPA), which is gradually built over a period prior to each repayment date to avoid pressure on any single month. Historical pattern of collections is robust and hence, cash flow coverages are expected to remain strong throughout the life of the instrument. Meanwhile, coverages since the issuance of the instrument have been stronger than expected.

This is attributable to good collection pattern, and increase in underlying revenues. Out of the series of TFCs issue, KE has successfully redeemed TFC (I) in Sep13 while TFC (II) is approaching maturity in Aug15 for which principal payment build up has started (since Sep14) on monthly basis.

Volatile domestic socio-political environment may exert some pressure on the issuer though its impact on TFCs performance is expected to remain limited. The ratings are dependent on the continued compliance with the predefined security structure of the instrument. Moreover, any significant deterioration in the performance of KE, impacting the projected collection stream, would have negative implications for the ratings.

For more information, contact:
Hammad Rashid
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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