Pakistan Credit Rating Agency Limited maintains entity and instrument ratings of Pakistan Refinery Limited

Lahore, June 30, 2015 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has maintained the long term and short term entity ratings of Pakistan Refinery Limited (PRL) at ‘A-‘ (Single A Minus) and ‘A2′ (A Two) respectively. The rating of TFC I of PKR3,000 mln and TFC II of PKR1,000mln have been maintained at ‘A’ (Single A). The ratings denote a low expectation of credit risk emanating from a strong capacity for timely payment of financial commitments.

The ratings reflect the strength of the business profile of PRL emanating from its sustainable operational history, strong demand of its products, and its strategic importance in the domestic context. The design of PRL’s plant offer relatively limited flexibility; in turn, low margin and high exposure to volatile dynamics of international crude oil and refinery product pricing. However, this is expected to witness beneficial change with soon to commission Isomerisation project, changing PRL’s product slate favourably.

The incremental cash flows are strong considering size of the related debt obligations. In addition, the stability in oil prices may supplement the profitability and hence cash flows. The company’s risk absorption capacity is weak on a stand-alone basis. Some respite is in the offing with latest right issue; though further consolidation in the ownership may be more helpful.

The ratings could be impacted by prolonged constrain in refining margins and/or adverse changes in the existing regulatory framework leading to depressed core cash flows. The company is pursuing a leveraged up-gradation of its operating platform. Since repayment pattern is aligned to expected cash flows, any completion delay may impact coverages, in turn, 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