The Pakistan Credit Rating Agency Limited (PACRA) has maintained the long-term and short- term entity ratings of House Building Finance Corporation Limited (HBFC) at 'A' (Single A) and A1 (A One), respectively. The rating of secured TFC issue of PKR 1,500mln has also been maintained at ‘A+’  (Single A Plus). The ratings denote a low expectation of credit risk emanating from a very strong capacity for timely payment of financial commitments.   HBFC’s ratings reflect its ownership structure – fully owned by the Government of Pakistan’s (GoP) through State Bank of Pakistan (SBP) and Ministry of Finance – and given HBFC’s pivotal role in GoP’s commitment in expanding the housing stock in the country, wherein the government is likely to continue supporting the Corporation. Meanwhile, the ratings recognize the Corporation’s adequate equity-base and strong liquidity position. The ratings also take into account the on going restructuring process of the entity aimed at bringing the requisite level of efficiency in operations.     The ratings recognize the weakness in the governance structure - substantial delay in appointment of a new MD and holding of BOD meetings - could have negative implications for the corporation’s prospects and can hamper the management’s commitment towards the ongoing restructuring process. Meanwhile, the trend of infections in respect of fresh loans is currently less than comfortable. While the management is committed to reduce the infection ratios to a low level, failure to do so would result in significant pressure on the ratings. HBFC is in negotiations with SBP for re-profiling of its outstanding financing, the outcome of which remains critical for future prospects of the corporation.   About the company: The House Building Finance Corporation (HBFC), established in 1952 under the HBFC Act, was transformed into a limited liability company in 2007. The GoP and SBP jointly hold the share capital of the corporation.    The primary objective of the Corporation is to provide financial facilities for the construction, re-construction, repair and purchase of houses, particularly to the low and middle-income groups of the economy. HBFC has a large network of 80 offices spanning across the country, managed through 12 zones with headquarters at Karachi.   Following completion of the contractual terms of Mr. Rizvi in Feb 08, Mr M.A Wahid, Executive Director of Support Functions Division, was given additional responsibility of the Acting MD of HBFC. After a substantial delay, Mr. Syed Azhar Abbas Jaffri has been appointed as the new MD recently. Mr. Jaffri possesses significant work experience in the financial industry, mainly at banks both local and international.   About the Sukuk Issue: HBFC has issued a secured privately placed Sukuk of PKR 1,500mln in May 2008. The Sukuk proceeds were mainly utilized for expanding the Corporation’s core lending operations. The Sukuk issue is for a tenor of 6 years, carrying profit at the rate of 6-months KIBOR plus 100bps, payable semi-annually in arrears. The principal redemption would be in ten equal instalments commencing from November 2009. The instrument has been secured by way of a first charge over specific assets (loans) with 25% margin. The underlying collateral is a portfolio of loans with good payment history. HBFC would ensure that the underlying security structure remains intact through the tenor of the Sukuk.

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