LRA Assigns Preliminary Instrument Rating to Fixed Income Investment II (Pvt) Ltd – Trust 02 - LKR 2,975,810,218 T Bond Securitization

Fixed Income Investment II (Pvt) Ltd – Trust 02 is a Special Purpose Vehicle that securitizes treasury bonds of up to LKR 2,975,810,218 Face Value. The rating reflects the robust securitization structure that ensures regular interest and principal repayments to the investors. The credit risk is considered minimal as the securitization is for Government of Sri Lanka's long-term fixed rate treasury bonds (less than 10 years maturity). The Tbond securitization is resilient to the recent domestic debt optimization in Sri Lanka. The interest rate fluctuation can impact the value of the bond and give rise to market risk. However, this risk, along with early repayment, will be undertaken by the investors as clearly mentioned in the offering document. With declining interest rates, the bonds have strong demand, reducing the market risk. The entire transaction will be routed through a trustee to ensure timely and secured payments. Further, LRA has taken into account the ability of the Tbond securitization promoter (Capital Alliance Holdings Limited Rated A- by LRA). The promoter's past experience in managing funds and Capital Markets will facilitate its smooth execution.
There is a built-in curing period (3 days), in case a payment is missed. The investors will receive fixed return only if they hold their positions until maturity and not in case of early redemption. Every approximate 100 days, the investors will have the option to roll over or pre-terminate the bond at market value. The average return on the trust certificates offered by the T-Bond securitization stands at of 14.0245% (net of fees) will be provided only if the instrument is held to maturity and all settlements would be made through the Fixed Income Investment II (Pvt) Ltd – Trust 02 account maintained with the Trustee (Peoples Bank). All settlements would be under the direct supervision of the trustee. Until all the agreed payments are made to the trust receipt owners, any excess will not be withdrawn. The Trustee will ensure timely payments and other legal aspects of the transaction.

About the Entity
Fixed Income Investment II (Pvt) Ltd – Trust 02 (“the Company”), a special purpose vehicle, company was incorporated under the Companies Act No.07 of 2007. The registered office of the Company is situated at level 5 Millennium House, No 45/58 Colombo. The company is a 100% owned subsidiary of CAL Holdings Limited. The ultimate majority ownership remains with Mr. W.A.T. Fernando (through Ashthi Holdings (Pvt) Limited) and Ms. Shiromal Cooray (through Jetwing Travels (Pvt) Ltd)

About the Instrument
The company will buy T bonds and securitize them and will issue trust receipts to investors against these securitized bonds. The total size of the securitization is LKR 2,975,810,218 (Face Value) with an average gross return of 14.0245% on the trust certificates, net of fees, if held to maturity.