PACRA Assigns Preliminary Ratings to TPL Corp Limited | Privately Placed Term Finance Certificates ("PPTFC") of PKR 2,500mln
|Rating Type||Debt Instrument|
The ratings encapsulate the strength of the security structure of Privately Placed Term Finance Certificates (PPTFCs). PPTFC has a multi-layered protection mechanism which provides intrinsic mitigation against unforeseen risk. PPTFC is secured against shares of TPL Properties, shares of TPL Insurance and shares of TPL Trakker with initial margin at 50% while 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, TPL Life Insurance and Right share issuance of the Company. The cash entrapment threshold for the proceeds from the sale of shares of TPL Trakker and TPL Life Insurance 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 insurance 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 76 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 Insurance 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 + 275bps.
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.
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.
TPL Corp plans to issue a PPTFCs 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. PPTFC carries markup of 3M KIBOR plus 2.5% 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.