LRA Assigns Preliminary Instrument Rating to CAL Property Fund (Pvt) Ltd - LKR 6Bn T Bond Securitization

CAL Property Fund (Pvt) Ltd is a Special Purpose Vehicle that securitizes treasury bonds of up to LKR 6Bn of Face Value. The rating reflects the robust securitization structure that ensures regular interest and principle 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). However, there is a possibility of haircut on the Government's domestic debt obligations as a debt restructuring/optimization program is under consideration. In case of a haircut, the investors will have to bear the economic loss and this will impact the yield accordingly. The interest rate fluctuation can impact the value of the bond and give rise to market risk. The entire transaction will be routed through a trustee to ensure timely and secured payments. However, this risk, along with early repayment, will be undertaken by the investors as clearly mentioned in the offering documents. With declining interest rates, the bonds will have strong demand, reducing the market risk. 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 a 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 weighted average return on the trust certificates offered by the T-Bond securitization stands at 24.75% (net of fees) will be provided only if the instrument is held to maturity and all settlements would be made through the CAL Property Fund (Pvt) Ltd account maintained with the Trustee (People’s 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 Until all the agreed payments are made to the trust receipt owners, any excess will not be withdrawn.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
Capital Alliance Property Fund (Pvt) Ltd (“the Company” or “CALP”) is a shell company which was incorporated in March 2022 under the Companies Act No.07 of 2007. The registered office of the Company situated at level 5 Millennium House, No 45/58 Colombo. CAL Property Fund ( Pvt) Ltd is a 100% owned subsidiary of CAL Holdings Limited (CALH). The majority shares of CALH is owned by Ashthi Holdings (Pvt) Ltd ( 37.1%). Ashithi Holdings (Pvt) Limited is owned and controlled by W.A.T. Fernando. The second majority is owned by Jetwing Travels (Pvt) Ltd (36.5%), this is controlled by Ms. Shiromal Cooray.

About the Instrument
CAL Property Fund (Pvt) Ltd will buy T bonds and securitize them CAL Property Fund (Pvt) Ltd will issue trust receipts to investors against these securitized bonds. The total size of the fund is LKR 6Bn (Face Value) with a weighted average gross return of 24.75% on the trust certificates, net of fees.