PACRA Maintains Entity Ratings of Pak-Libya Holding Company (Private) Limited

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PACRA Maintains Entity Ratings of Pak-Libya Holding Company (Private) Limited

December 18, 2017

Lahore, December 18, 2017 (PPI-OT):The ratings of Pak Libya reflect the sovereign parentage – jointly owned by Governments of Pakistan and Libya. However, so far, this strength has not translated fully in supporting the entity in meeting deficiency in its regulatory capital requirement. The approval for further extension in compliance with capital requirement remains dependent upon commitment from sponsoring Governments.

Nevertheless, with the organic growth of the company, the gap with minimum capital requirement is gradually being abridged. Benefiting from the increasing credit offtake in the country, lending side of Pak Libya picked up pace along with sustaining the quality. Treasury operations continue to strengthen the financial position of the company; investment in government securities dominates the book with limited exposure in equity market through investments in diversified blue chip stocks. Last year, the Company managed to repossess assets of Kamoki Energy Limited (KEL) – Pak Libya’s largest non-performing exposure – a strategic investment on the books. As the exposure was completely provided for, value earned from transfer of assets buffered the equity.

Management has applied for power generation license for Kamoke Powergen Limited (KPL: newly formed Company), approvals pending, and eventually plans to sell it off. Although the management is actively pursuing it, with improving energy dynamics, this may be challenging. Operational profitability has been sustained in all three quarters of CY17. The management continues to cautiously expand its existing loan book through corporate finance activities and further penetrating in SME segment while initiating secured consumer financing for corporate employees. The management expects to capitalize on new avenues led by economic activities related to CPEC.

The ratings have a “negative outlook”, signifying the need to comply with regulatory minimum capital requirement (shortfall of PKR 1.258bln as at end-Sep17). Consistent efforts by the management to stabilize revenue stream and add further diversity to operations would remain critical. Meanwhile, sustaining asset quality would help maintain the ratings. Timely sell-off of KEL is important for the ratings.

For more information, contact:
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425

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