Pakistan Credit Rating Agency maintains Ratings of Financial Receivables Securitization Company

Lahore, July 13, 2012 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has maintained the ratings of the asset-backed term finance certificates issue of PKR 700mln (Class A; 550mln; Class B: 150mln) by Financial Receivables Securitization Company Limited (FRSCL) at ‘A+’ (Single A Plus). The rating denotes a low expectation of credit risk emanating from a strong capacity for timely payment to the TFCs holders.

FRSCL’s ability to meet TFCs holder’s obligations is a function of management fee generated by securitized mutual funds of JS Investments Limited (JSIL). JSIL has largely maintained its assets under management (AUM) base with slight reduction in securitized funds.

The reduction in securitized funds was mainly owing to restrained performance of equity funds though, to a large extent, driven by weak stock market. JSIL’s profitability – though improving – remains constraint, due to muted growth in AUMs as against the industry trend, thereby restraining the core fee income. This has exerted pressure on FRSCL’s coverages.

JSIL’s success in averting the declining AUM is critical to continue enabling FRSCL fulfill its obligations from securitized cash flows. The management is confident that any further material decline is unlikely, and, lately, the industry has also shown sizable growth. Moreover, FRSCL can exercise a put option on the originator (JSIL) for TFC Class ‘B’ Holders to create cushion for meeting its financial obligations, wherein JSIL intends to honour such call, if need arises.

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