Karachi, VIS Credit Rating Company Limited has downgraded the instrument ratings for Agha Steel Industries Limited's (ASIL) Sukuk-3 to 'BB-' with a negative outlook, aligning with the entity’s medium to long-term ratings and reflecting potential economic vulnerability.

According to VIS Credit Rating Company Limited, this rating adjustment from 'Stable' to 'Negative' reflects concerns about ASIL’s ability to meet its financial obligations following an operational disruption in January. Established in 2013, ASIL transitioned from a private to a public limited company in 2015 and was listed on the Pakistan Stock Exchange in 2020. The company, operating from Port Qasim Authority in Karachi, specializes in producing and selling steel bars, wire rods, and billets.

ASIL issued a Sukuk on August 17, 2023, valued at PKR 3.4 billion, to refinance previous debt, featuring a 4-year tenor with a 1.5-year grace period, and secured against fixed and immovable assets. An accident in late December led to a temporary halt in plant operations, with a partial resumption in mid-January 2024 and an expected full recovery within two quarters.

The rating downgrade is a result of the impact of these operational challenges on ASIL’s financial stability and production capacity. The company has engaged in negotiations with lenders to restructure its debt and facilitate the restoration of full operational capabilities to meet debt servicing requirements.

VIS’s future rating reviews will focus on the successful restructuring process, the financial recovery of ASIL, and the extent of sponsor support to cover any financial shortfalls.