KARACHI: The Pakistan Credit Rating Agency Limited has maintained the entity ratings of Pakistan Services Limited (PSL), which operates under the Pearl Continental brand, emphasizing the company's significant asset base and established role in Pakistan's hospitality sector. Despite maintaining a prominent position with a portfolio exceeding 1,200 rooms, PSL continues to face challenges associated with its substantial debt burden and liquidity issues, while its credit profile is heavily reliant on the effective execution of a debt restructuring strategy.
According to PACRA, the hospitality industry in Pakistan is witnessing a gradual recovery due to improved domestic travel and government initiatives promoting tourism, with the market projected to grow at a double-digit rate over the medium term. However, the sector's profitability is hindered by high operating costs, energy tariffs, inflation, and low international tourist inflows. During the review period, PSL experienced notable governance changes following a significant shift in ownership, including acquisitions by AKD Group Holdings, AKD Securities, Mr. Dawood Jan Mohammad, Thatta Cement Company Limited, and Fauji Foundation. Despite these changes, the company’s board and management structure remained largely stable, except for the appointment of Mr. Adnan Ahmed Saeed as Acting CFO.
PSL's operations have remained stable, maintaining its revenue-generating capacity and profitability. However, its financial risk profile is stressed due to significant debt obligations. Since starting its deleveraging program, PSL has repaid substantial portions of its debt, yet outstanding obligations include PKR 6.8 billion in principal, notably a PKR 4.5 billion Sukuk facility. The company’s substantial non-current asset base provides some support against these obligations, but unresolved restructuring negotiations and pending asset divestments are critical areas of concern.
The company’s credit profile depends on the successful implementation of its debt restructuring and asset monetization plans. The future stability of PSL's ratings hinges on resolving uncertainties related to its going concern status, maintaining liquidity, profitability, and adhering to restructuring milestones. External auditors have highlighted material concerns regarding the company's going concern status, which remains a pivotal factor for future rating assessments.