JCR-VIS Credit Rating Company Limited maintains Entity Ratings of Grays Leasing Limited

Karachi, October 22, 2013 (PPI-OT): 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 and 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 over dues. 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 more information, contact:
Ms. Sobia Maqbool
CFA
JCR-VIS Credit Rating Company Limited
Tel: at 021-35311861-70
Fax: +9221 35311872-3

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