Press Release

JCR-VIS Assigns Preliminary Rating of AA- to the Proposed Sukuk Issue of Century Paper & Board Mills Limited

Karachi, September 24, 2007: JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has assigned preliminary medium to long term rating of AA- (Double A Minus) to the proposed sukuk issue of Rs. 3 billion of Century Paper & Board Mills Limited (CPBL). Further, JCR-VIS has assigned medium to long term rating of A- (Single A Minus) and short-term rating of A-2 (A Two) to CPBL. The outlook on the medium to long term ratings is ‘Stable’. The final rating on the sukuk issue will be assigned on examination of signed legal documents, incorporating relevant covenants supporting the assigned rating.

The ratings take into account the company’s significant experience in the sector as well as the strong sponsor support which has been evident in the last few years in shape of participation in right share issue as well as injection of loans in the company to support the currently ongoing expansion which targets to double the size of the company’s operations. The low pricing power in the sector due to availability of cheaper imports entails that profitability be enhanced through increase in sales volume which is the aim of the current expansion. However, this has changed the hitherto conservative business and financial policy followed by the management with considerably increased risk of off take associated with the new project since the existing operations do not have the capacity to service the project debt. Further, there is risk of removal of the protection available to the industry in shape of import duties which would create pricing pressure for the local producers in that event.

The Sukuk issue is for a tenor of seven years with principal redemption to start from the 30th month from the date of first disbursement. The management’s proposed structure of the transaction, to mitigate these risks, has been given due weightage by JCR-VIS which includes the sponsors’ commitment to subordinate the outstanding sponsor loans of Rs. 1.65b to the TFC issue, with principal repayments to commence five years after the issuance of proposed sukuk certificates. Further, Standby Letter of Credit (SBLC) of Rs. 1.5b will be arranged from at least a AA rated bank after the expiry of grace period on principal repayment subject to certain covenants in addition to charge on the company’s assets.

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 Madani
Group Head

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 2007 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited