ARGUS CREDIT RATING SERVICES LTD

(ACRSL)

Credit Rating Report

M/s Helal & Brothers

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Credit Rating Rcport
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CRTDIT RATIN6

Clonildcntial and Lirn Lls"-

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Ref No , ACRSL25062/21
Company Name ,M/s Helal & Brothers (HB)
Assigned Ticker : HelalBroNarsingdi
Activity ,Textile Miscellaneous, Manufacturing
lncorporated On I O1 Jan 2003

Head office : Shekherchar, Baburhat, Narsingdi Sadar, Narsingdi, Bangladesh

Rating Type , Corporate / Entity

Rating Validity .02 Feb 2022
Analyst(s) , ACRSL Analyst Team
Committee(s) ; ACRSL Rating Committees

Rating Summary

Credit Rating Current Previous

Long-Term A+ A+

Short-Term ST.1 ST.1

Publishing Date 03 Feb 2021 24 Oct2019

Rating Explanation

Rating
lnvestment grade. High credit quality and low expectation of credit risk. when
this rating indicates the obligor has strong capacity to meet
A+
nancial obligations but may be vulnerable to adverse economic co
compared to obli with higher credit ratings.
H ighest certainty of ti mely payment. Short -term liq ui d ity
tn cluding internal

ST.1 fu n d gen e rati on rs very stro ng and access to a Iternative sou rces of fun ds ts
outsta n d rs a most ike risk free G overnm nt short-term on s.

Rating Validity: This validity assumes no additional loan over that disclosed in FY20[EndingJune
301 audited/management certified balance sheet and that management has disclosed
all

material & adverse to financials since FY2O

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Credit Rating RePort

ExEculvE Suruunnv:

Strengths:

a M/s Helal & Brothers (HB) profitability margin demonstrated a standard

trend over the last three years compare to peer' HB is engaged in 1O0%
export oriented Readymade Garments manufacture specially lungi' Sharee
and3.Pieces.ThemarginsharplydecreasedinFY20duetocovlD.l9.ln-
spite of sharp decreasing of profitability margin, the margin remain of
the
businessentityisstandardcomparetopeer.lncreasingcapacityutilization
and effective cost management strategy and and highly experienced
positive rating
manaBement helpi to maintain such standard margin. which is
factor in our view.

HB has maintained debt levels within operational limits' HB has a

a
strong
base of operating income which enables the company to service its debt
obligations in particular interest expense through operating earnings' From

FY18 to FY20, the operating income of HB stood at BDT

485'96 MN' 493'35
MN and BDT 279.54 MN respectively, in line with its financial expense of BDT
signifies
39.g6 MN, BDT 59.37 MN and BDT65.30 MN correspondingly, which
that HB has the ability to service its financial expense obligation multiple
times through its operating earnings.

Strong equity growth kept HB's capital structure more equity oriented'
HB
a

hasmaintainedlowdebtloadinitscap|talstructure.FromFYl8toFY20HB,s
total debt was BDT 66205 MN, BDT 62000 MN and BDT 76947 MN

respectively. Whereas, the company's equity base was BDT 1961"72

MN' BDT
2498.54MNandBDr2732.74MNcorrespondingly'Consideringthe
superiorityinequitybaseagainstdebtload,ACRSLresearchholdsapositlVe
view about the capital structure of HB'

Concerns:

a HB'Srevenuehasexperiencedafluctuatingtrendbetweenoverthelast
of HB,s
three years from FY18 to FY2o.During the period FY18.FY19, revenue
sharply increased by 2.75% YoY, up from BDT 3658'25 MN to BDT 3758'95
MN.OntheotherhandduringtheperiodofFYlgtoFY20'revenuehas
decreased by 73.37% YoY, from BDT 3758'95 MN to BDT 3256'42
MN' Net-
net HB's top line achieved a CAGR of -5'65% from FY18 to FY20'

Bangladesh,s apparel industry's image to the global arena that ultimately

is
o

not iruitful for the workers or owners. Besides wage hike, infrastructure
problem, energy, and land crisis, high bank interest rate etc' are also
prevailing as major challenges for the sector' Due to these complications'
instead of having the prodigious potential for investments to the sectors'
to
national and foreign investors are not expressing adequate keenness
urged to improve ease of doing business in the
invest here. Business leaders
NewYear.NowBangladeshisoneofthebottommostperformersoneaseof
doing business, it is 176 out of 190 countries'

a5
o The impo rt cost and export earnings in this fiscal year have witnessed
percent fall comPared to the same period of the last fiscal year due to
spreading Covid-19. Th is fall could further stretch at the end of the current
Bangladesh
fiscal year. The impact of covid-19 is already visible and in March,
saw a USS 529.83 million (Tk. 4,500 crore) fall in imports and nearlY US$
635.80 million (Tk5,400 crore) in exports' Country's import order
has
ry last
dropped by more than 12 percent or nearly USDS 663

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due to supply chain disruption caused by the coronavirus outbreak in China.

According to the Central Bank's latest data, opening of letters of credit (LCs),
generalty known as import orders, came down to USS 4.63 billion on January
from USS 5.29 billion a month ago. Meanwhile, the country's overall imports
decreased by 4,44 percent to US$ 34.58 billion in the first seven months of
this fiscalyear from USS 36.19 billion in the same period of FY'19. According
to the Export Promotion Bureau, the country's export earnings in July-
February period of FY20 has dropped by nearly 5 percent to USS 26.24 billion
amid the coronavirus outbreak, from USS 27.66 billion in the same period of
FY19.

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Key Rating Drivers

a HB has maintained debt levels within operational limits. HB has a strong

base of operating income which enables the company to service its debt
obligations in particular interest expense through operating earnings. From
FYL8 to FY20, the operating income of HB stood at BDT 485.96 MN, 493'35
MN and BDT 27g.54 MN respectively, in line with its financial expense of BDT
39.86 MN, BDT 59.37 MN and BDT 65.30 MN correspondingly, which signifies
that HB has the ability to service its financial expense obligation multiple
times through its operating earnings

o lnterest coverage ratio: Historically, the company has maintained

good interest coverage ratio, which is positive in our view' Between
FY18 to FY20, HB's interest coverage ratio demonstrates a standard
trend compare to peer. The interest coverage ration was L2'19x,
8.31x and 4.28x in FY18, FY19 and FY20 respectively' which is
positive in our view,

a Strong equity growth kept HB's capital structure more equity oriented' MFL
has maintained low debt load in its capital structure. From FY18 to FY20 HB's
total debt was BDT 662.05 MN, BDT 620.00 MN and BDT 769'47 MN
respectively. Whereas, the company's equity base was BDT 1961'.72 MN, BDT
2498.54 MN and BDf 2732J4 MN correspondingly. Considering the
superiority in equity base against debt load, ACRSL research holds a positive
view about the capital structure of HB.

o Debt to Equity Ratio: Historically, the company has maintained a

low debt to equity ratio, which is positive in our view. During the ast
three years, the ratio remained 0.34x,0.25x and 0,28x in FY18 to
FY20, representing superior equity base against debt load'

a ACRSL research have a positive long term outlook on Bangladesh's RMG

sector. RMG is the largest export oriented sector of Bangladesh & one of the
key economic drivers of country's economy. Three decades of experience,
incredible growth to non-traditional markets, competitive pricing, low labor
cost, depreciation of BDT against USD and other currencies, lean
manufacturing etc. has boosted RMG sector.

o The futuie ofBangladesh's RMG industry is bright. Owing to the

political calm and the strong economic rebound in the Western
world, prospects for the garments business are better than ever'
Since Bangladesh is the second largest garment exporting nation in
the world, there are opportunities for growth here too' Garments'
ewners predict big business in the near future as China, the largest
garments exporter in the world, continues to lose business due to
increased costs of production and shortage of skilled workers'
Following such a shift in production conditions, Bangladesh's
prospects look bright.

o European Union and other importers are willing to move from China
to Bangladesh to establish big enterprises. The geographic lotation
of Bangladesh is ideal for global trade, with very convenient access
to international seaports, air routes and others. For example- three
sea ports like-Chittagong, Mcingla and Rayra, three international
airport, twenty two land poris and Komlapur inland container depot
(lCD) that already we have. Fully implication 4

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lane highway will be helpful to reduce the transportation lead time'

Trained, enthusiastic, hardworking and low-cost labor force suitable
for any labor-intensive industry.

o ln the country, there are a good number of green industries and

global standards RMG factories complied with safety issues The
expected market share would be about 7 per cent within the next
few years as a good number of green factories are in the offing for
production, which would add new volume to the country's
production capacity,

o After three decades, Bangladesh is now Second largest RMG

exporting nation after Chlna. During the FY18- FY19 garment export
was worth about USD 32.00 billion. Foreign buyers are confident
about the world-class standard and quality of apparel items. For the
last two decades quality of our RMG products has been able to meet
the standards of world renowned buyers.

o RMG (Ready-made Garments) is the leading sector in Bangladesh in

terms of foreign currency earnings. Bangladesh is the second largest
garments exporter next to china. lt contributes 80% of total export
earnings. ln Bangladesh there are 4 million people, working in
around 6000 garments factories and approximately 80% people of
them are female.

o lncreasing export to nontraditional markets is helping RMG Sector'

Rising export to nontraditional markets like Australia, Japan, Russia,
South Korea, Brazil, Chile, Mexico etc. is highly encouraging This
market can help the sector recover from bad patch in traditional
ma rkets.

o Competitive pricing has created an opportunity for Bangladesh s

apparel sector to attract new buyers. lnternational brands are

placing more orders from China to Bangladesh as China, the largest
apparel exporting country, has become expensive for them due to
higher cost of production and shortage of workers in the RMG
secto r.

a ACRSL remains concerned with respect to Bangladesh's RMG sector, which

is facing challenges in the near to intermediate term, driven by recent
incidents of workers' death in Rana plaza collapse, fire tragedy in Tazreen
Fashion and standard Group, significant exposure to EU and US market,
increased cost of imported raw materials, lead time, political uncertainty etc.

o One of the biggest challenges currently facing garment industry is to

make our factories safer and ensure better working conditions for
millions of garment workers' The Tazreen fire and Rana Plaza
collapse have brought the issue of workplace safety to the fore' The
accidents have caused a paradigm shift within the industry'

o Shortage of uninterrupted power and quality utility services is a vital

problem to enhance industrialization in the country, lf gas price is
hiked, it will hurt backward linkage whereas backward linkages are
playing the major rule in global RMG market and also expansion of
existing business. lndustry insider are also thinking that shortage of
skilled workers to produce high value added products of readymade
garments. Some countries in Africa have had zero-tariff facility
under AGOA act which helils them to compete with Bangladesh
RMG sector

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o Sales in the US market could be negatively affected following a
decision by the US government to suspend Bangladesh's preferential
duty treatment under the USA's Generalized System of Preferences
(GSP) scheme, and Bangladesh's preferential access to the EU could
also be revoked if the Bangladesh government does not take the
necessary steps to significantly improve building safety standards
and overall labor conditions in the country.

o Garment industry's high focus on western countries remains a

concern. The US accounts for 23% of total garments export while
58% is derived from EU countries according to EPB data. ln case of
adverse economic conditions in those regions, our apparel sector
may experience overall slowdown.

o Bangladesh is far from being self-sufficient in cotton and almost 99%

of the cotton is imported. Cotton export banned by any of the
cotton exporting countries would cause a negative impact both on
the production and export of textiles and readymade garments since
the price of imported cotton and yarn has increased significantly
thus affecting the competitiveness of locally made apparel items
sign if ica ntly.

o The international market has become highly competitive and price

sensitive. Level of competition and rivalry is very high among both
the local and international manufacturers. Hence, it has become
tough for smallgarments manufacturers to keep their profit margins
up to the mark.

Special note: At the time of publication of this credit rating report by ARGUS Credit
Rating Service Limited (ACRSL), management certified financial statements from FY18
to FY20 (ending June 30) were available, projections for FY21 and FY22 were arrived
after taking in to consideration subsequent events up to the date of repoat ng,
management feedback, and industry insights.

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1 CORPORATE PROFILE

1.. 1 Coupnruv DEscRtPloN

a History: M/s Helal & Brothers (HB) is the leading marketing concern of
Amanat Shah Group. lt encompasses a wide range of enterprises like
manufacturing, marketing and export of Lungi, Sharee, 3-Piece, Poplin, Voile,
print Voile and Gamcha etc. with its manufactring hubs at Baburhat
(Narsingdi), Joypara (Pabna) and Sirajganj. M/s Helal & Brothers bears the
first-ever tagline of export of non-traditional Lungi from Bangladesh and
opened a new vistas for this woven and tubular home-wear' With
manufacturing base at 4 major textile hubs of the country M/s Helal and
Brothers is promoting Lungi and other textile products and exporting to 14
countries uptill now and is contemplating to increase its export destinations.
Started its maiden journey 27 years ago the company has helped assuming
the enterprise into a maior Textile Group of Bangladesh having 4 key
industrial units engaging 7000+ industrial workers. M/s Helal & Brothers
manufactures 100% Cotton as well as Mixed-yarn.

a Amamat shah Group consist of some companies. The sister concern of this
group are following :

o Amanat Shah Fabrics

o Hazrat Amanat Shah Spinning Mills Limited
o Amanat Shah Weaving Processing Limited
o M/s Helal & Brothers
o Hazrat Amanat Shah Securities Limited
o Farm 2 Firm Management Limited
o Tea Estate

Financial Base: At the end of FY20, The business entity's Total Assets stood at BDT
3512.36 MN, Equity atBDr 2732.74MN, Revenue at BDT 3256.42 MN and Net Profit
After Tax at BDT 214.23 MN.

1.2 OwNERSHTP SrRUcruRE

MOHAMMAD HELAL MIAH

President-Bangladesh Lungi Manufacturers, Traders & Exporters Association;

Proprietor- M/s. Helal &Brothers (Manufacturer of Amanat Shah Lungi,
Standard Lungi, Sharee & 3 Pieces); Chairman- Amanat Shah Lungi (Pvt') Ltd'
Hazrat Amanat Shah Securities Ltd. Amanat shah weaving Processing Ltd.
Amanat Shah Fabrics Ltd. Nadi-Bangla construction Ltd. Managing Director-
Hazrat Amanat Shah Spinning Mills Ltd. Director- Midland Bank Ltd. Fareast
lslami Life lnsurance Co. Ltd. Member BoT- Southeast University; Life Time
Member- Narsingdi Model School.

Table 1 Nature of Ownership/Directors' Shareholding Percentage

EM!
,fiL-':ia' [.lOHAMMAD HILAL MIAH 100.00%

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1.3 OpeRnrtorus

corporate office :city center Level-2 4, gol1,, Motijheel c/A Dhaka-1000, Bangladesh

Factory: Shekherchar, Baburhat, Narsingdi Sadar, Na rsingdi, Bangladesh

Head Office: Amanat Shah Tower Shekherchar, Baburhat Narsingdi, Bangladesh'

SHOWROOM:AmanullahComplex8T,lslampur,Dhaka-L100Bangladesh'

sHowRooM: Nawab Ali Market 1st floor Dariapur Bazar shajadpur, Shirazganj

Ba ngladesh

Number of employee :Total number of employees is around 2600'

production capacity of Lungi : About 3500 pieces of lungi manufacturing every day

production capacity of Sharee : About 700 to 800 pieces of sharee manufacturing

every day.

Production capacity of 3- Pieces: About 1000 to 1500 pieces of 3-Pieces

ma nufacturing everY daY.

1.4 PRoDUcrs AND SERVIcES

a M/s Helal & Brothers is renowned for manufacturing and trading different
typesof Lungi, Voil, Popline, Gamsa, Sharee and 3-Piece The business
products
entity's customer base is growing over the years due to it's superior
quality. The entity always maintain standard quality in it's manufacturing and

trading process. Their core products are given below:

a Amanat Shah Lungi

Amanat Shah LUNGI introduces chic pattern and shades and also weaving
varieties. Beside 100% cotton stuffs, there are mixed yarn varieties as well
These too leave its mark for quality of blending and world-class dyeing,
printing and other processing protocols' From common home wearing
its gala
varieties to fabulous (like Muslin) variety of Amanat shah Lungi makes
appearance at cozy shelves and display closets of most of our local

supermalls and international brand outlets'

Amanat Shah Voil

Voile is a soft, sheer fabric, usually made of 100% cotton or cotton blended
with linen or polyester. Long fine fabric sheet used for making Ladies summer
wear&innergarmentsBecaUseofitslightweight,thefabricismostlyused
in soft furnishing.

Amanat Shah PoPline

poplin traditionally consisted of a silk warp with a weft of worsted yarn. ln
thisCase,astheweftisintheformofastoutcordthefabrichasaridged
structure,likerep,whichgavedepthandsoftnesstothelustreofthesilky
surface. The ribs run across the fabric from selvedge to selvedge'
Poplin is now made with wool, cotton, silk, rayon, polyester or a mixture
of
warp threads are of
these. Being a plain under/over weave, if the weft and
the same material and size, the effect is a plain woven surface with no

ribbing. Shirts made from this material are easy to iron and do not wrinkle
ea sily

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a Amanat Shah Gamsa

A gamucha (also gamocha (ga=body, mocha=wipe), gamchcha, gamcha) is a
traditional thin, coarse cotton towel, often with a checked design, found in
lndia, Bangladesh, as well as various parts of south and southeast Asia; it is
used to dry the body after bathing or wiping sweat.

o Standard Lungi
Wehelpedhandloomstagetogoaheadwithmodernizationand
advancement of technology through input, marketing and infrastructural
support, welfare measures, composite growth-oriented package and,
particularly, through most creative research and development. standard
Lungis are of common users'choice for colour stay and fabric longevity.
Applicable both to pure cotton as well as mixed varieties standard LUNGI
also excels in a wide variety from quality, shade, print and weaving
variations, which is ideal for individual buyer's combined consideration of
value pick and price tags.

a Standard Sharee
Driven by tradition and groomed by heritage Sharee of Bangladesh is an
ensemble of the finest Oriental glamour. We took initiatives to provide our
buyers with best quality Sharee. Standard Sharee is, therefore, highly
competitive in the market in that it offers a variety of price and shade, print
and texture to choose from. southeast Asia's principalwomen's wear Sharee
is explored out of its fullest potential with traditional Bangladeshi weaving,
designing, fabric variety and unparalleled prints. M/s Helal & Brothers
harboured the weaving craftsmanship across the country by providing finest
yarn, best dyes and chemicals, block and printing designs to produce
Standard sharee - like Jamdani, Tant (handloom), Tangail, Pabna, Ruhitpuri,
Mirpuri etc. ln particular exception, we have redesigned, refurbished and
retrieved the glory known widely as BangladeshiJamdanivariety'

a Standard 3-Piece
Our specialty is in exquisite 3-Piece for women (Salwar, Kameej and Urna
(scarf) with design excellence and attractive embroidery works. These are
immensely popular for being competitive and design-driven and of affordable
price tags. we started our manufacturing base with weaving fabrics for
fashion wear in handloom which has, for decades, excelled in traditional
craftsmanship with its flexibility and ver-satility. Modern technology and value
additions like embroidery, karchupi and other innovative pattern have led to
further product value addition.

a Standard Fabrics

ln order to impart the required functional properties to the fiber or fabric, we

have specialization over generations in the precision of physical and chemical
treatments necessary particularly for cotton fabrics like Lungi, 3-Piece and
Sharees with varying properties for specific fiber like synthetic fibers such
as

polya mide, polyester and polyacrylonitrile etc.

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Credit Rating Report
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2 CHARTS

2.1 lrucorur Srnrrruerur CxaRrs

4,Ulrl 0rl 2000ts

3,000 00 1s.00 ts

2,000.00 1rl D0 %

l-,000 00 5.fl0 s

0.00 0.00 96
2018 201-9 ?020 2018 2019 2020

250.0u l-4.00 %

:t 2.00 %
200.00
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150.00 800%

600%
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50.00
WW 4trO96

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0.00 0.00 %
2018 2019 2020 201-8 2019 202D

1,4.00 E L4 00

12.00 S :t 2.00

10.00 % 10.00

E,UU }6 |100

6.00 s, 6.00

4.00 S 4.00

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0.00 s r1.00
2018 20t-9 2020 201-8 2019 2020

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Credit Rating Report
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2.2 Bnmrucs Sxrer Cxents

Debt Ta

2,000.00

0.30
1,500.00

0.?0
1,000.00
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Credit Rating Report
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2.3 CnsH Flow AorQuAcY CHARTS

Total Debt

0.80 040

0.2n

0.60 0.00
W
0.40 W -0.20

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0.20 W -0.60

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Credit Rating Report ffi
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APPENDIX A: SUMMARY OF FINANCIAL METRICS

Cash & 123.7A 94.41

Trade Receivable 422.56 652.53 952.43
I nvento ries
r,123.56 1,1-68.54 1,275.65
Tolal Current Assets 1,791 .37 2,159.90 2,564.13
I nvestm ents
342.68 417.85 384.85
Fixed Assets{At cost less Depreciation) 488.08 544.52 562.86
Total Non-Current Assets 831.31 962.92 948.23
Total Assets 2,678.68 3,122.82 3,512,36
Payable and Accrued [xpenses 2.24 1.53 6.59
Othe r CLrrrent Liabilities 2.67 2.76 3.56
Short Term Debt 662.05 620.00 7 69.47
Total Current tiabilities 666.96 624.29 779.6)
Long Term Debt 0.00 0.00 0.00
Other Non-Current Liabilities 0.00 0.00 0.00
Total Non-Current Liabilities 0.00 0.00 0.00
TOtal Liabilities 666.96 674.29 779.62
lssued, Subscribed & Paid Up Capital 0.00 0.00 0.00
Retained Earnings r,961.72 2,498.54 2,132.74
Reserves & Surplus 0.00 0.00 0.00
Total Shareholders 1",961..72 2,498.54 2,132,74
Total Shareholders & Liabilities

Revenue/Sales/Turnover 3,658.25
Cost o{ Revenue/ Cost of Goods Sold 2,999.71 3,082.34 2,776.02
Gross Profit (Lossi 658.49 676.61 480.40
Operating Expenses 1"72.52 183.26 200.86
Operating Pro{it 48s.96 493.35 279.54
Financial Expense/ lnterest [xpense 39.86 59.37 65.30
Nct Profil before WPPF 446.11. 433.98 21,4.23
other Expense 0.00 0.00 0.00
Net Profit Before Tax 446.1J 433.98 714.23
Provision for Tax 0.00 0.00 0.00
Net After Tax 446.1,1 43 3.98 214.23
FY2g
-593.78 724.L0 -204.05
Net Cash from Operating Activities
Net Cash from lnverting Activitles
,7 2 4.2L - 131.61 1-1 5r
Net Cash from Financing Activities 1,374.08 60.78 160 16
increase/(Decrease) in Cash and Cash Eqr'rivalents 56.10 53.26 29.)J
Cash and Cash Equivalents at the Opening 14.35 70.44 123.1a
Cash and Cash EqLrivalents at the Closing 70.44 723.70 94.41

Source: HB's Financial Statements from FY18-FY20

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Credit Rating Report
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APPENDIX B: SUMMARY OF ANALYTICS

Revenue Growth 2.15% -1"3.31%

Gross Profit Margin 18.00% 18.00% L4.75%

Operating Prolit t\4argin 13.28% L3.t3% 8.58%
Net Profit Margin 12.20% L1.55% 6.58%
lnterest Coverage Ratio 72.19x 8.31x 4.2.8x
ROA 25.98% 15.09% 6.46%
ROE 43.25% 79.46% 8.19%
Debt to Equity Ratio 0.34x 0.25x 0.28x
Accounts Payable Turnover 1358.89x 1638.31x 684.46x
Accounts Receivable Turnover 17.11x 6.99x 4.06x
Inventory Turnover Ratio 3.32x 2.69x 2.27x
Cu rrent Ratio 2.69x 3.46x 3.29x
Cash Conversion Cycle(Days) 729 185 247
Furrd from Operations,/Total Debt 0. 7 Jx 0.80x O. l 6x
operating Cash riow/Total Debt -0.90x 0,20x -4.27x
Free Cash Flowll-otal D0bt 1.99x '0.01x -0.25x
Toral Debr/EBITDA 1.36x 1.26x 2.66x

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Copyright'e 201 I ARGUS Credit Rating Sen'ices Lirnited
Credit Rating Report

APPENDIX C: LONG TERM RATING DETAILS

ACRSL CoRpoRere / Erurrrv Rnrtruc (Lorrrc Tenm)

AAA investment grade. Highest credit quality with lowest exPectation

TripleAofcreditrisk.Whenassignedthisratingindicatestheobligorhas
(Highest Safety) exceptionally strong capacity to meet its financiat obligations
and
itishighlyunlikelythatthisCapaCitywillbeimpactedadverselyby
foreseeaL:le events'
AA+, AA, AA- lnvestment grade. Very high credit quality and minimal
Doub|eAexpectationofcreditrisk'Whenassignedthisratingindicatesthe
(t.]ighSafety)obligorhasverystrongcapacitytomeetitsfinancialob|igations
andisunlikelytobeimpactedadverselybyforeseeableevents.
A+, A, A- lnvestment grade. High credit quality and low expectation of
SingleAcreditrisk.Whenassignedthisratingindicatestheobligorhas
(Adequatesafety)strongCapaCitytomeetitsfinancialob|igationsbutmaybe
vLrlnerable to adverse economic conditions compared to obligors
with higher credit ratings'
BBB+,BBB,BBB.lnvestmentgrade'GoodcreditqualityandmoderateeXpectation
Triple B of credit risk. when assigned this rating indicates the obligor has
(IVlorlerateSafety)adequateCapacitytomeetitsfinancialobligationsbutthis
capacity remains more vulnerable to adverse economic
a on Llrtion 5

BB+, BB,8B- risk When assigned this

5pecuiatrve grade Substantial credit
DoubIeBratingindicatestheobligorhasbusinessorotheralternativesto
(lnadequate Safety) rneet current i'inancial obligations but is substantially vulnerable
toadverseeconomicConditionsthatmayimpairabilitytomeet
the future
>uch obligatrott> rn
B+, B, B- Highly Speculative grade' High credit rlsk When assigned this
SingleBratinEiinriicatestheobligorhasbusinessclrotheralternativesto
(Risky)cUrrentlymeetitsfinancialobligationsbutthedegreeofcertainty
regardingtimelVpayfirentoffinancialobIigationsisdoubtful
unless circumstances inlprove and remain favorable'
(l+, CC, CC- Highiy Vulnerable grade Very High credit risk When assigned this
DoubleCratingindicatestheobiigorisneartodefaultandthedegreeof
(Vulnerable) certainty regarding timely payment of financial obligations is
doubtful unless circumstances improve. This rating may indicate
thataninsolvencypetitionhasbeenfiledorsimilaractionhas
been taken, but payments on the obligation are being continued
with high degree of external support.
(+, C, C- Default,mminent. This category for an institution is considered to
Single C be either currently in default or expected to be in default with
(Near to Default) high probability. The obligor with this rating is unlikely
to meet
maturing financial obligations.
D ln Default. This category for an institution is of the lowest credit
Single D quality. The rating indicates the obligor has already failed to meet
(Defau lt) itsfinancialobligationsandmayhaveenteredbankruptcy
p roceed i ngs.

e 201 I ARGLTS Credir Rating Sen'ices f ::.1

Copyrighl
 Credit Rating Report

APPENDIX D: SHORT TERM RATING DETAILS

ACRSL ConpoRnre / Enrrrv Rerrruc (Sxonr Tenru)

sT-1 Highest Grade

Highest certainty of timely payment. Short-term liquidity including
internal fund generation is very strong and access to alternative
sources of funds is outstanding, Safety is almost Iike risk free
Govern ment short-term obligations.
sT-2 High Grade
High certainty of timely payment. Liquidity factors are strong and
suppclrted by goocj f uncjarrental protection factors. Risk factors are
very srnall.
sT-3 Good Grade
Good certainty of timely payment. Liquidity factors and company
fundanrentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
sT-4 Satisfactory Grade
Satisfactory liquidity and other protection factors qualify issues as
to investment grade. Risk factors are larger and subject to more
va riation.
sT-5 Non-lnvestment Grade
Speculative investment characteristics. Liquidity is not sufficient to
insure against elisruption in debt service. Operating factors and
market access may be subject to a high degree of variation.
sT-6 Defa u lt
lssuer failed to meet scheduled principal and/or interest payments,

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Copyright O 201 I ARGUS Credit Rating Sen'ices Limited