JCR-VIS assigns preliminary rating of ‘A’ to facility of Avari Hotels Limited

Karachi, October 29, 2014 (PPI-OT): JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned a preliminary rating of ‘A’ (Single A) to the proposed Rs. 1.5b facility (comprising Rs. 1b of Islamic Musharaka and Rs. 500m of conventional financing) of Avari Hotels Limited (AHL). Outlook on the rating is ‘Stable’.

The assigned rating incorporates a cash flow capture mechanism developed to entrap the revenue stream of Avari Xpress properties for the purpose of principal repayment of this facility. The facility has a tenor of 5 years and the entrapment mechanism will begin from Year 2 when principal repayments commence.

It has been further secured by the assignment of rental receivable from a tenant occupying Avari Towers Karachi as well as revenue from other Avari properties, to service any shortfall in the principal repayment during the life of the facility.

Interest payable on the facility is however not being captured through the aforementioned revenue entrapment mechanism. This amount will have to be met either from the remaining cash flows of the company or through sponsor support. The sponsors have in past demonstrated support towards the company.

In addition to AHL’s well established presence in the high end hospitality sector, AHL’s entry into the Mid-Tier Hospitality (MTH) sector through Avari Xpress, has contributed positively to the company’s growth in more recent years. Avari Xpress, presently with a total of 100 rooms and projections of adding a further 590 rooms over the next 5 years in several large cities of Punjab, is expected to provide meaningful contribution to the revenue stream and cash flows of the company, going forward.

For more information, contact:
Ms. Sobia Maqbool
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk

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