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The Pakistan Credit Rating Agency Limited
Press Release

Date
30-Nov-21

Analyst
Faiqa Qamar
faiqa.qamar@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Assigns Preliminary Ratings to TPL Corp Limited | Privately Placed Islamic Certificates (Sukuk) of PKR 2,500mln

Rating Type Debt Instrument
Current
(30-Nov-21)
Action Preliminary
Long Term AA-
Short Term -
Outlook Stable
Rating Watch -

The ratings encapsulate the strength of the security structure of Privately Placed Islamic Certificates (Sukuk). Sukuk has a multi-layered protection mechanism which provides intrinsic mitigation against unforeseen risk. Sukuk is secured against shares of TPL Properties and shares of TPL Trakker with initial margin maintained at 50% while the Company is required to maintain at least 30% at all times. The Company will establish and maintain the Debt Payment Accounts (DPA). The DPA will be held under exclusive lien for the benefit of the Participating Institution(s). DPA will be funded by the dividends from group companies, proceeds from the sale of Sponsor shares in TPL Trakker and Right share issuance of the Company. 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 security structure of the instrument is further beefed up by the takaful guarantee which is indeed the first resort for the issue agent in case of non-payment risk is about to materialize. This covers the first quarterly profit payments of upto c. PKR 75 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 realization of underlying security on immediate basis. First call for realization would be made for encashment of takaful Guarantee. In case the proceeds from insurance company does not fall through within the pre-agreed timeframe or there is some degree of shortfall, the Trustee would initiate the process for realization of 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 in a timely manner. Maximum length of the cure period can be 15 days. The cure period availed would attract mark-up at the rate of 3M KIBOR + 250bps.
The ratings further depend on the projected performance of existing strategic investments. The investment portfolio of TPL Corp Limited is diverse and some of the investments are anticipated to yield dividends as well.

About the Entity
TPL Corp Limited has exhibited an evolving structure as a Holding Company. TPL Properties (TPLP) and TPL Trakker (TPLT) remain prominent players in their respective sectors. On a standalone basis, TPL Corp is yet to receive consistent dividends/payout from its investments.

About the Instrument
TPL Corp plans to issue a Sukuk of ~PKR 2,500mln (with a greenshoe option of ~PKR 750mln) to repay the upcoming bullet payment of PPCP, increase stake in TPLP and TPL Life, and repay TPLT. Sukuk carries markup of 3M KIBOR plus 2.25% per annum. Profit will be payable quarterly in arrears calculated on a 365 day year basis on the outstanding principal amount. The first such profit payment will fall due 3 months from the issue date. Principal redemption shall commence from the 3rd year of the issue date in 6 equal installments.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.