The JCR-VIS Credit Rating Company has reaffirmed the entity ratings of Grays Leasing Limited (GLL) at 'BBB+/A-2' and the 'preliminary' medium to long-term rating of 'A-' (Single A minus) assigned to the secured and listed Term Finance Certificates (TFCs) of Rs 500 million, proposed to be issued by GLL.
Amid a challenging environment in the leasing sector, business activity at GLL reduced during FY06 and earnings remained stressed. However, profitability indicators have witnessed some recovery during the on-going financial year and the company continues to operate at low leverage.
Portfolio quality also weakened during FY06, although NPLs appear to be in check at current levels. Liquidity indicators have improved since FY05. GLL is planning to issue listed, rated, and secured Term Finance Certificates (TFCs). The TFCs issue of Rs 500m (including green-shoe option of Rs 100 million) is expected to be floated in the near future with pre-IPO investment of Rs 240m and a tenor of 5 years.
The instrument is priced on floating rate basis with a margin of 2.5 percent, the base rate being average ask rate of six month KIBOR. The return on TFC is capped at 19 percent. The instrument carries a call option, with a call protection period of 24-months.
The TFCs are secured by first pari-passu charge on all present and future assets of GLL. The initial amount to be secured is Rs 320 million (charge against pre-IPO of Rs 240 million), which will be subsequently enhanced to Rs 666.67 million, 15 days prior to the Public Offering for the TFC issue.-PR
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