Karachi, October 21, 2016: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned entity ratings of ‘AA-/A-1’ (Double A minus /A-One) to Superhighway Construction Operation & Rehabilitation Engineering (Private) Limited (SCORE). Outlook on the assigned ratings is ‘Stable’.
The ratings assigned to SCORE takes into account its strong ownership profile with Frontier Works Organization (FWO) holding 100% stake in the company. Experience of FWO in executing similar projects in the past and presence of sponsor’s irrevocable and unconditional guarantee infavor of SCORE is a key rating factor. Project cashflows are a function of timely completion, estimated traffic volumes and user’s willingness to pay for service; material deterioration in these factors may put pressure on entity’s ability to timely service its debt obligations.
SCORE entered into a concessionary agreement for 25 years with National Highway Authority (NHA) in March, 2015 to convert existing 4-lane Karachi-Hyderabad superhighway into 6-lane motorway (M-9) on Build, Operate and Transfer (BOT) basis. M-9 is expected to offer various savings to commuters including lower vehicle operating cost, lesser time and distance which may not be available in the alternative route. Traffic profile depicts a mix of commuters with revenue from trucks and articulated trucks representing more than 60% of total revenue. After the completion of each section, toll will be charged according to the distance travelled by each vehicle. Moreover, presence of Electronic Toll & Traffic Management (ETTM) system will help in minimizing collection losses.
Liquidity profile of the project draws comfort from the strong revenues which are expected to remain stable. 70% of the project cost is funded through debt while remaining being the equity contribution from FWO. Moreover, toll collected during construction period will also be used for construction purposes As per the arrangement, SCORE is required to maintain a Debt Service Coverage Ratio (DSCR) of 1.25. Project involves land acquisition and settlement issues which may cause delays in project completion.
For further information on this rating announcement, please contact the undersigned (Ext: 501) or Mr. Mohammed Khalid Ali (Ext: 508) at (021)35311861-70 or fax to (021) 35311872-3.
Applicable Rating Criteria: Industrial Corporates (May 2016)
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