Hammad ul Hassan
PACRA Assigns Preliminary Rating to PPTFCs of Orix Leasing Pakistan Ltd.
|Rating Type||Debt Instrument|
Orix Leasing Pakistan Limited intends to issue secured, privately placed Term Finance Certificates ("PPTFC") of PKR 3bln (inclusive of PKR 1bln greenshoe option). This is being done with an aim of financing the business requirements of the Company. PPTFC is secured against specific charges on leased and financed assets and related receivables with an initial margin maintained at 25% that collectively covers value amounting to PKR 4bln (approx.). The ratings reflect OLP's leading market position in the industry. In the current economic conditions, the focus of the Company remained on risk management and risk diversification. Further, the Company utilizes its experience of the past thirty-five years to gauge the market situation and make the right decisions in the fast-changing environment. COVID-19 has raised multiple challenges for the corporate and financial sectors. While ramifications of the pandemic are still unfolding with multiple expected waves, the economic wheel has started rolling. This has been positively cushioned by steps taken by the regulatory and governing bodies. Under challenging conditions, OLP remained focused on maintaining the quality of its assets and exploring various options to maintain profitability, which was successfully achieved in the recently reported period. The economic revival with impetus on the construction sector along with the growth of the automobile sector bodes well for the company. The Company is committed to expanding its portfolio with extreme caution and maintaining a quality portfolio by mitigating respective risks.
The Company maintains a fairly healthy funding structure; the main source of funding remains bank borrowing and CoDs. The Company’s ability to maintain its market position while generating sound profitability is due to a diverse customer base. The Company’s rating also depends upon keeping its financial profile intact. Any significant change in its risk profile may adversely impact the ratings.
ORIX Leasing Pakistan Limited (OLP) commenced commercial operations in 1986. OLP is listed on Pakistan Stock Exchange (PSX). OLP is majority-owned by ORIX Corporation (49.58%), Arif Habib Group (7.53%) and State Life Insurance Corporation (SLIC) (5.25%). The remaining shareholding is distributed among other corporates and the general public. The nine-member board constitutes four Non-Executive Directors who are nominees of ORIX Corporation, three independent directors and the Chief Executive Officer (CEO) and Deputy CEO as Executive Directors. Mr. Shaheen Amin, CEO, is a seasoned professional and has been associated with the ORIX group since 1986.
The issue amount is PKR 3,000mln, inclusive of the PKR 1,000mln greenshoe option. Allied Bank Limited shall be the Financial Advisor and Lead Arranger. Tenor is up to 05 years with a 1-year grace period. The profit rate is 3-month Kibor plus 80bps per annum with no floor or cap. Repayments shall be made in 16 equal quarterly installments, with the first principal repayment falling due at the end of 15 months from the date of the first disbursement. The proceeds are mainly to support and expand the leasing book.