JCR-VIS Credit Rating Company Limited has once again reaffirmed the House Building Finance Company Limited's entity rating of 'A/A-2' (Single A/A-Two). The ratings incorporate the shareholding structure of HBFCL jointly held 62.5 percent by the Government of Pakistan (GoP) and indirect stake of 37.5 percent by the State Bank of Pakistan (SBP).
SBP is both shareholder and major lender of HBFCL. As stated in the letter issued by the CEO of JCR-VIS, the assigned rating incorporates the strategic importance of HBFCL as a housing finance arm of GoP; implicit support of the GoP to restructure the institution in a manner that becomes financially viable has also been built into the ratings.
Liquidity cushion available to HBFCL against borrowing has increased over time with deployment of significant portion of recoveries in highly marketable t-bills and the balance in bank deposits over the past few years. Investment in T-bills represents a higher proportion of total assets at end-2011 as compared to prior years. Moreover, timely payments have been made against the outstanding Sukuk issue.
The ratings continue to be placed under 'Rating Watch-Developing' status on account of negotiation with SBP and Ministry of Finance for a recapitalisation plan, which may entail conversion of SBP debt into equity and injection of additional capital. This would allow the institution to improve capitalisation levels and meet the regulatory minimum capital requirement.-PR