PACRA maintains the rating of TPL Corp Limited | PP Sukuk | Jun-22 | RW

The ratings encapsulate the strength of the security structure of Privately Placed Islamic Certificates (Sukuk). Sukuk has a multi-layered protection mechanism that provides intrinsic mitigation against unforeseen risks. Sukuk is secured by way of i) shares of TPL Properties and shares of TPL Trakker with 30% margin to be maintained at all times ii) Debt Payment Accounts (DPA) and iii) insurance guarantee. However, due to dwindling stock market performance the margins have fluctuated, for which the Company has provided the additional shares of TPL Properties. Resultantly, the margin requirement is improved. As per management representation, going forward further improvement in stock market is expected, which would support in 100% compliance with the security margin. The DPA is being held under exclusive lien for the benefit of the Participating Institution(s). DPA is being funded by a) the dividends from group companies, b) proceeds from the sale of Sponsor shares in TPL Trakker, and c) Right share issuance of the Company. For the latest payment made, the DPA is funded by the dividend from group companies. The cash entrapment threshold for the proceeds from the sale of shares of TPL Trakker is two upcoming installments. Similarly, the cash entrapment threshold for the proceeds from Right Share issuance is three upcoming installments. The insurance guarantee is indeed the first resort for the issue agent in case of non-payment risk is about to materialize. This covers the quarterly profit payments of up to ~PKR 100 mln each quarter. As last resort, the issue agent has the right to liquidate the shares, in case, before the payment date, DPA is not funded. In case the issuer does not build the requisite amount of upcoming installment in DPA on the desired date, the issue agent would initiate the process for the realization of the underlying security on an immediate basis. The first call for realization would be made for encashment of the takaful Guarantee. In case the proceeds from the insurance company do not fall through within the pre-agreed timeframe or there is some degree of shortfall, the Trustee would initiate the process for the realization of the appropriate quantum of under-lien shares. This event would initiate a cure period, without invoking the event of default, to manage all modalities and transfer of installment in DPA promptly. The maximum length of the cure period can be 15 days. The cure period availed would attract markup at the rate of 3MK + 250bps while the instrument carries markup at the rate of 3MK +225bps. The rating would remain contingent on the compliance with the security structure.

About the Entity
TPL Corp previously known as TPL Trakker, is a public listed company and is engaged in making investments in Group and other companies. Mr. Ali Jameel heads the Company as the CEO and is aided by a team of experienced professionals.

About the Instrument
TPL Corp have issued a Sukuk of ~PKR 2.19bln to contribute towards reprofiling of existing debt and acquisition of additional shares of group companies. Sukuk carries markup of 3M KIBOR plus 2.25% per annum. Profit is being paid quarterly in arrears calculated on a 365 day year basis on the outstanding principal amount. Principal redemption shall commence from the 3rd year of the issue date in 6 equal installments.