JCR-VIS Reaffirms the Rating of Sukuk of Century Paper and Board Mills Limited

Karachi: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the rating of ‘A+’ (Single A Plus) assigned to the Sukuk issued by Century Paper and Board Mills Limited (Century). Outlook on the rating is ‘Stable’.

The rating derives comfort from the improvement in industry dynamics and strong support from sponsors. Century’s cash flow position posted marked improvement in line with the improved profitability. Debt servicing coverage ratio in FY11 was recorded at 1.4x.

With profit retention and retirement of long term debt, Century’s capital structure has witnessed improvement. This improvement is likely to continue in the coming periods as the long term debt matures, as Century does have any major capital expenditure planned at present.

Some additional long term funds have been mobilized in the on-going year to finance the acquisition of coal fired boiler, though overall debt levels are on a decline. This investment is likely to enable Century to enhance its capacity utilization levels. Gas shortage resulted in forced shut down for almost 105 days in FY11 (FY10: 77 days), resulting in lower capacity utilization.

Furthermore, the Sponsors have also provided continued financial support to Century in the form of subordinated loans and subscription to preference shares. The 5-year lock-in period on the long term loans expires in September 2012. At this time, as per the agreement, the company can retire sponsors’ loan in the same proportion as the matured long term Sukuk and syndicated borrowings.

As per the company, such debt will only be retired out of surplus funds generated in any given year, after meeting the debt servicing requirement of market based borrowings. Furthermore, the company has so far not paid out any dividends on preference shares, despite availability of profits.

For more information, contact:
Mr. Javed Callea
Advisor
JCR-VIS Credit Rating Company Limited
Tel: +9221 35311861 (10 lines) (Ext: 501)
Fax: +9221 35311872-3
E mail: javed.callea@jcrvis.com.pk

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