The Pakistan Credit Rating Agency Limited
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Muhammad Atif Chaudhry

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PACRA maintains the rating of TPL Corp Limited | PPTFC | Jun-22

Rating Type Debt Instrument
(14-Jul-23 )
(14-Jul-22 )
Action Maintain Initial
Long Term AA- AA-
Short Term - -
Outlook Stable Stable
Rating Watch - -

The ratings encapsulate the strength of the security structure of Privately Placed Term Finance Certificates (PPTFCs). PPTFC has a multi-layered protection mechanism that provides intrinsic mitigation against unforeseen risks. PPTFC is secured by way of i) shares of TPL Properties, shares of TPL Insurance, 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, which the Company has managed to comply by adding additional shares of TPL Properties and TPL Insurance. Resultantly, the margin requirement is improved. 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, TPL Life Insurance, 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 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 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 103mln 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 Insurance 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 + 275bps while the instrument carries markup at the rate of 3MK +250 bps. 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. TPL Trakker was incorporated in Pakistan on 04-Dec-08, as a private limited company and was converted into a public company in 2009. 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 PPTFCs of ~PKR 2,265mln to contribute towards reprofiling of existing debt and acquisition of additional shares of group companies. PPTFC carries markup of 3MK plus 2.5% per annum. Profit is being paid quarterly in arrears on the outstanding principal amount. 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.