Press Release

JCR-VIS Assigns Preliminary Rating of A- to the Proposed Sukuk of Shahmurad Sugar Mills Ltd.

Karachi, September 11, 2007: JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has assigned a preliminary medium to long-term rating of A- (Single A Minus) to the proposed sukuk issue of Rs. 500m of Shahmurad Sugar Mills Limited (Shahmurad). The preliminary rating will be converted to final on review of relevant signed legal documents. Further, the medium to long-term entity rating of BBB (Triple B) and short-term entity rating of A-2 (A Two) have been re-affirmed. The outlook on the medium to long term ratings is ‘Stable’.

While re-affirming the entity ratings, JCR-VIS has primarily taken into account the demonstration of support by the company’s sponsors through a further injection of subordinated debt of Rs. 100m. This action more than offsets the impact of the significantly reduced level of the company’s operational cash flows vis-à-vis the earlier projections by the company’s management. JCR-VIS expects that disposal of the balance inventory of sugar and distillate should improve last quarter’s results, while the indications for the next sugar season appears to be good with predictions of a good crop and an agreement on the ex-mill sugar price for the first time ever between the Pakistan Sugar Mills Association and the government.

The purpose of the proposed five-year sukuk issue is to re-finance outstanding debt to take advantage of the favorable rate being offered as well as correct the existing mismatch in the maturity profile of assets and liabilities on the balance sheet. This would include repayment of the pre-IPO disbursement of Rs. 240m against the previously proposed listed TFCs which also carried an ‘A-‘rating; this rating will stand withdrawn as soon as JCR-VIS receives confirmation of payment in that regard.

On the currently proposed sukuk, there will be a two year grace period on principal repayment with the issue priced at 6-month KIBOR plus 2.25% with floor and cap of 7% and 25% respectively. The issue is to be backed by a first pari passu charge over all present and future fixed assets of Shahmurad with a margin of 25% and bank guarantee of Rs. 100m from an A+ rated bank. In the event that the company is unable to provide adequate charge on assets, then the funds drawn under the sukuk issue will be limited to the amount of guarantee secured from the A+ rated bank.

For further information on this rating announcement, please contact Mr. Saad A. Madani ( and Ms. Sadaf Aliuddin ( at 5311861/5311862/5311863 or fax to 5311873.

Saad A. Madani
Group Head

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-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. JCR-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. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-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 2007 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited