The JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial medium to long-term and short-term entity ratings of 'BBB-' (Triple B Minus) and 'A-3' (A Three) respectively to Associated Constructors Ltd (ACL).
The outlook on the medium to long-term rating is 'Stable'.
The entity ratings primarily take into account the reputation enjoyed by ACL as a professional and quality conscious construction company with decades of experience of handling large and small-scale projects both locally and internationally.
However the industry is cyclical in nature and the availability of lucrative projects depend largely upon the level of economic activity. ACL did not execute any major project during the period FY1998-2002. However, the company's financial performance showed considerable improvement in FY2003.
ACL has operated at very low debt leverage levels as funding requirements were generally being covered through mobilisation advances and monthly billings from ongoing projects.
During the current fiscal year, the company obtained a major construction contract from Defence Housing Authority for six out of total 12 blocks of Creek Vistas Towers in the Creek City Project.
The value of this contract is approximately Rs 1.5 billion. In order to finance the purchase of specialised construction equipment for the project, ACL is in the process of structuring a securitised financing transaction to raise Rs 100 million.
The structure will be based on sale of the contract receivables of this project.
This transaction will be the first of its kind in Pakistan and will encourage participants in the construction industry to enter the organised sector.
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