Lanka Rating Agency
Press Release


+94 114 500099

Applicable Criteria

  • Methodology | Debt Instrument Rating | Jun-22

Related Research

  • Sector Study | Capital Markets | May-23

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 LRA

LRA Assigns Preliminary Instrument Rating to Fixed Income Investment 1 (Pvt) Ltd's LKR 5.75Bn T Bond Securitization

Rating Type Debt Instrument
Action Preliminary
Long Term A
Outlook Stable
Rating Watch -

Fixed Income Investment I (Pvt) Ltd is a Special Purpose Vehicle that securitizes treasury bonds of up to LKR 5.75Bn 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. 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 will 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 weighted average return on the trust certificates offered by the T-Bond securitization stands at of 24.74% (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 1 (Pvt) Ltd 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 1 (Pvt) Ltd (“the Company” or “FII 1”), a special purpose vehicle, company was incorporated in April 2023 , 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. FII 1 is a 100% owned subsidiary of CAL Holdings Limited. The ultimate majority ownership remains with Mr. W.A.T. Fernando (through Ashithi Holdings (Pvt) Limited) and Ms. Shiromal Cooray (through Jetwing Travels (Pvt) Ltd).

About the Instrument
Fixed Income Investment 1 will buy T bonds and securitize them. FII 1 will issue trust receipts to investors against these securitized bonds. The total size of the fund is LKR 5.75Bn (Face Value) with a weighted average gross return of 24.74% on the trust certificates, net of fees, if held to maturity.

The primary function of LRA 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. LRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. LRA 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.