VIS Awards ‘A+’ Rating to OBS Pakistan’s Second Sukuk Issue

Karachi, The VIS Credit Rating Company Ltd. (VIS) has assigned a final rating of ‘A+’ (Single A Plus) to the second Sukuk issue of Rs. 2.9 billion by OBS Pakistan (Private) Limited (OBS-Pak), indicating good credit quality with adequate protection factors and a stable outlook. This follows a previous rating action announced on September 25, 2023, reflecting the company's consistent performance and potential for growth despite economic fluctuations.

According to VIS Credit Rating Company Limited, OBS-Pak, operating as a Special Purpose Company (SPC) under AGP Limited (AGP), has successfully acquired a portfolio of 17 pharmaceutical brands from Viatris Inc. and Pfizer Inc., at an estimated cost of Rs. 9.3 billion. This strategic acquisition aims to enhance OBS-Pak's market presence, supported by a financing structure comprising 75% debt and 25% equity. The company raised Rs. 3.6 billion through its first Sukuk issuance and has now secured an additional Rs. 2.9 billion through its second Sukuk issuance.

The second Sukuk, with a seven-year tenor and an 18-month grace period, was issued on November 29, 2023. It features a profit rate of 3M KIBOR plus a 1.60% spread, with the principal repayments distributed across 22 quarters and quarterly profit payments commencing three months post-disbursement. The security for the Sukuk includes a comprehensive structure involving a mortgage/hypothecation charge on AGP's fixed assets, a corporate guarantee from AGP, and joint pari passu lien rights over the collection accounts for both Sukuk issuances, ensuring robust protection for investors.

The rating reflects the strong market position of OBS-Pak’s parent company, AGP Limited, and the operational, managerial, and financial support that OBS-Pak benefits from within the group. The non-cyclical nature of the pharmaceutical industry and steady demand growth further support the company's business risk profile. Despite facing initial operational challenges, management anticipates recovery through strategic price adjustments, volume increases, and supply chain stabilization.

The company's strong market positioning, particularly with its top products across various therapeutic areas, offsets concerns related to portfolio concentration risk. Expectations of improved liquidity, capitalization, and coverage profiles are grounded in the projected revenue generation from the acquired portfolio and strengthened cash flows. However, the rating remains sensitive to the company's ability to execute its projected plans effectively, including liquidity management, leverage reduction, and debt servicing capacity enhancement, with the corporate guarantee from AGP Limited providing an additional layer of security.

For more details on this rating announcement, interested parties are encouraged to contact the designated representatives at VIS Credit Rating Company Limited.