Pakistan Credit Rating Agency Limited assigns entity ratings to Fazal Weaving

Lahore, September 08, 2016 (PPI-OT):PACRA has assigned a long-term entity rating of ‘A-‘ (Single A Minus) and short-term rating of ‘A2’ (Single A Two) to Fazal Weaving Mills Limited (Fazal Weaving). These ratings denote a low expectation of credit risk emanating from a strong capacity for timely payment of financial commitments.

The ratings of Fazal Weaving primarily reflect irrevocable and unconditional guarantee on all long term obligations from financial institutions by Fazal Cloth Mills Limited (Fazal Cloth) – the parent. Fazal Weaving, a wholly owned subsidiary of Fazal Cloth, runs a small sized spinning unit, which is at nascent stage of business operations. Fazal Weaving’s standalone risk profile is weak owing to (i) limited scale of operations, (ii) high business concentrations – customer as well as geographical (iii) off-late debt driven expansion thus putting additional pressure on coverages, and (iv) highly leveraged capital structure.

However, regular financial support from Fazal Cloth cushions the risk profile. Going forward, the management expects its standalone profile to improve given on account of positive industry dynamics – better crop size and continued supply of RLNG, and absence of any further debt driven expansion. The ratings are dependent on continuation of irrevocable and unconditional guarantee on financial obligations by the parent company. Meanwhile, improvement in stand-alone performance of the entity is considered important.

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