Press Release

VIS reaffirms Entity ratings of Superhighway Construction Operation and Rehabilitation Engineering (Pvt.) Limited

Karachi, October 30, 2019: VIS Credit Rating Company Limited has reaffirmed entity ratings of Superhighway Construction Operation and Rehabilitation Engineering (Pvt.) Limited (SCORE) at ‘AA-/A-1’ (Double A Minus/A-One). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on November 30, 2018.

Superhighway Construction, Operation & Rehabilitation Engineering (Private) Limited (SCORE) has been primarily formed for conversion of 4-lane Karachi-Hyderabad Superhighway into 6-Lane motorway (M-9) on build, operate and transfer basis. The company has entered into a concession agreement with National Highway Authority (NHA) for a period of 25 years starting in March 2015. Toll collection from the road commenced in June 2018.

The assigned ratings reflects strategic importance of the M-9 motorway which offers various savings to commuters including lower vehicle operating cost, lesser time and distance which are not available in the alternative route. Ratings also incorporate sound profile of the sponsor, Frontier Works Organization (FWO), which holds 100% shares of the company. Experience of FWO in managing similar infrastructure projects in the past and presence of sponsor’s irrevocable and unconditional standby guarantee in favor of SCORE for debt repayments is considered important from ratings perspective.

Despite significantly higher traffic volumes vis-à-vis projected levels, overall revenues remained below projections on account of lower toll charged and distance travelled by commuters’ vis-à-vis assumed in the financial model traffic. Cushion in debt servicing has declined due to lower than projected revenues and higher interest rates. Resultantly, Company has not been setting aside funds for major maintenance as had initially been planned. VIS expects cash flows (after adjusting for expenses) from operations to be slightly short of debt servicing requirements for FY20. Comfort is drawn from sizeable cash balance available with the Company which can be drawn from in case of shortfall. Ratings remain dependent on restoration of debt servicing buffers and strong commitment of sponsors to meet any projected shortfall.

For further information on this rating announcement, please contact the undersigned (Ext: 207) at 021-35311861-71 or fax to 021-35311872-3.

Jamal Abbas Zaidi

Applicable Rating Criteria: Toll Roads (November 2018)

Industrial Corporates (June 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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