Commercial Credit & Finance PLC Debenture Issuance 2021 - Managers to the issue
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Commercial Credit & Finance PLC
Debenture Issuance 2021
Managers to the issue
COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021 1
COMMERCIAL CREDIT & FINANCE PLC
DEBENTURE ISSUE 2021
For an initial issue of 10,000,000 (Ten Million) Senior Listed Redeemable Rated Guaranteed
Five Year (2021/2026) debentures of LKR 100.00 each with an option to issue up to a
further 10,000,000 (Ten Million) of the said debentures to raise a maximum of Sri Lanka
Rupees Two Billion (LKR 2,000,000,000)
Guaranteed by Hatton National Bank PLC
To be listed on the Colombo Stock Exchange
Instrument Rating [SL]AA(CE) with Stable Outlook by ICRA Lanka Ltd
Issue opens on
24 February 2021
This Prospectus is dated 19 February 2021
2 COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021
The CSE has taken reasonable care to ensure full and fair disclosure of information in this
Prospectus. However, the CSE assumes no responsibility for accuracy of the statements
made, opinions expressed or reports included in this Prospectus. Moreover, the CSE does not
regulate the pricing of the Debentures issued herein.
The delivery of this Prospectus shall not under any circumstance constitute a representation
or create any implication or suggestion that there has been no material change in the affairs
of the Company since the date of this Prospectus. In the event if there would be a material
change since the date of this Prospectus, that the Company would make a market
announcement.
If you are in doubt regarding the contents of this document or if you require any
clarification or advice in this regard, you should consult the Manager to the issue, your
stockbroker, lawyer or any other professional advisor.
Responsibility for the Content of the Prospectus
This Prospectus has been prepared by Capital Alliance Partners Limited on behalf of Commercial
Credit and Finance PLC. Commercial Credit and Finance PLC (hereinafter referred to as “COCR” or
the “Company”) and its Directors confirm that to the best of their knowledge and belief this
Prospectus contains all information regarding the Company and Debentures offered herein which
is material; such information is true and accurate in all material aspects and is not misleading in
any material respect; any opinions, predictions or intentions expressed in this Prospectus on the
part of the Company are honestly held or made and are not misleading in any material respect;
this Prospectus contains all material facts and presents them in a clear fashion in all material
respects and all proper inquiries have been made to ascertain and to verify the foregoing. The
Company accepts responsibility for the information contained in this Prospectus.
No person has been sanctioned to make any representations not contained in this Prospectus in
connection with this Offer for Subscription of the Company’s Debentures. If such representations
are made, they must not be relied upon as having been authorised. Neither the delivery of this
Prospectus nor any sale made in the Offering shall, under any circumstances, create an implication
that there has not been any change in the facts set forth in this Prospectus or in the affairs of the
Company since the date of this Prospectus.
Investors should be informed that the value of investments can vary and that past performance is
not necessarily indicative of future performance. In making such investment decisions, prospective
investors must rely on their knowledge, examination and assessments on COCR and the terms of
the Debentures issued (knowledge, perception together with their own examination and
assessment on COCR and the terms and conditions of the Debentures issued) including risks
associated.
COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021 3
The delivery of this Prospectus shall not under any circumstance constitute a representation or
create any implication or suggestion, that there has been no material change in the affairs of the
Company since the date of this Prospectus.
Registration of the Prospectus
A copy of this Prospectus has been delivered for registration to the Registrar General of Companies
in Sri Lanka in accordance with the Companies Act No. 07 of 2007 (the “Companies Act”). The
following documents were attached to the copy of the Prospectus delivered to the Registrar
General of Companies in Sri Lanka:
1. The written consent by the Managers to the Issue, Lawyers to the Issue, Bankers to the Issue,
Auditors and Reporting Accountants to the Issue, Trustees to the Issue, Rating agency to the
issue and Registrar to the Issue for the inclusion of their respective names in this Prospectus.
2. A declaration by each of the Directors of the Company in terms of the Companies Act and
confirming that each of them have read the provisions of the Companies Act and CSE Listing
Rules relating to the issue of a Prospectus and that those provisions have been complied
with.
3. The said Managers to the Issue, Lawyers to the Issue, Bankers to the Issue, Auditors and
Reporting Accountants to the Issue, Trustees to the Issue, Rating agency to the issue and
Registrar to the Issue have not, before the delivery of a copy of the Prospectus for registration
with the Registrar General of Companies in Sri Lanka withdrawn such consent.
Registration of the Prospectus in Jurisdictions Outside of Sri Lanka
This Prospectus has not been registered with any authority outside of Sri Lanka. Non-resident
investors may be affected by the laws of the jurisdiction of their residence. Such investors are
responsible to comply with the laws relevant to the country of residence and the laws of Sri Lanka,
when making the investment.
Investment Considerations
It is important that this Prospectus is read carefully prior to making an investment decision. For
information concerning certain risk factors, which should be considered by prospective investors,
see “Risks Related to the Debentures” in Section 5.18 of this Prospectus.
4 COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021
Forward Looking Statements
Any statements included in this Prospectus that are not statements of historical fact constitute
“Forward Looking Statements”. These can be identified by the use of forward looking terms such
as “expect”, “anticipate”, “intend”, “may”, “plan to”, “believe”, “could” and similar terms or variations
of such terms. However, these words are not the exclusive means of identifying Forward Looking
Statements. As such, all or any statements pertaining to expected financial position, business
strategy, plans and prospects of the Company are classified as Forward Looking Statements.
Such Forward Looking Statements involve known and unknown risks, uncertainties and other
factors including but not limited to regulatory changes in the sectors in which the Company
operates and its ability to respond to them, the Company’s ability to successfully adapt to
technological changes, exposure to market risks, general economic and fiscal policies of Sri Lanka,
inflationary pressures, interest rate volatilities, the performance of financial markets both globally
and locally, changes in domestic and foreign laws, regulation of taxes and changes in competition
in the industry and further uncertainties that may or may not be in the control of the Company.
Such factors may cause actual results, performance and achievements to materially differ from any
future results, performance or achievements expressed or implied by Forward Looking Statements
herein. Forward Looking Statements are also based on numerous assumptions regarding the
Company’s present and future business strategies and the environment in which the Company will
operate in the future.
Given the risks and uncertainties that may cause the Company’s actual future results, performance
or achievements to materially differ from that expected, expressed or implied by Forward Looking
Statements in this Prospectus, investors are advised not to place sole reliance on such statements.
COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021 5
ISSUE AT A GLANCE
Instrument Senior Listed Redeemable Rated Guaranteed debentures
Issuer Rating [SL]BBB with negative outlook by ICRA Lanka Limited
Issue Rating [SL]AA(CE) with stable outlook by ICRA Lanka Limited
Number of Ten Million (10,000,000) Debentures with an option to raise a Ten Million
Debentures to be (10,000,000) Debentures in the event of the oversubscription of the initial
Issued issue.
Aggregate Face Value
/ Investment Value of LKR 2,000,000,000 (Rupees Two Billion)
the Issue
Face Value / Issue
Price/Par Value of LKR 100.00
Debenture
Tenure of Debentures 5 Years (2021/2026)
Fixed Coupon Rate of 9.00% p.a. payable annually (AER : 9.00%)
Interest Rates
Minimum subscription per application is 100 debentures (LKR10,000/-) and
Minimum
Applications exceeding the minimum subscription should be in multiples of
subscription
100 debentures (LKR10,000/-)
Issue Opening Date 24 February 2021, however, applications may be submitted forthwith
17 March 2021 or such earlier date on which the 20,000,000 (Twenty Million)
Issue Closing Date Debentures are fully subscribed in terms of this Prospectus. (Refer section
5.16)
To be allotted at the discretion of the Chief Executive Officer and/or the Chief
Financial Officer or any person authorized by the board of directors in a fair
manner within seven (7) market days from the date of closure (Refer Section
6.7). However, the Number of Debentures to be allotted to identified
institutional investor/s of strategic and operational importance, on a
Basis of Allotment
preferential basis or otherwise, will not exceed 75% of the total number of
Debentures to be issued with this Prospectus under any circumstances, unless
there is an undersubscription from the other investors (Investors that do not
fall into the preferential category).In the event of such under subscription
from other investors, such other investor category shall be allotted in full.
Date of Payment of Interest Payments will be made no later than three (3) market days from the
Interest due date of interest. (Excluding such due date of interest)
Method of Payment Through an electronic fund transfer mechanism recognised by the banking
of Principal and system of Sri Lanka such as SLIPS and RTGS (arranged only at the expense of
Interest the investor). RTGS transfers however could be effected only for amounts over
and above the maximum value (Rupees Five Million) that can be
accommodated via SLIPS transfers or by cheque marked "Account Payee Only"
in the event accurate bank details have not been provided. If the applicant has
6 COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021
not provided details of his bank account in the application, the entity shall
make such payments to the applicant by way of a cheque.
On completion of Five years (05) from the date of allotment, or on such earlier
Maturity date date on which the Debentures are redeemed or become payable in terms of
the Trust Deed.
Hatton National Bank PLC has provided a guarantee up to a value of Sri Lankan
Rupees Two Billion and Three Hundred Sixty million (2,360,000,000/-), being
Guaranteed
the principal sum and two interest payments at the Rate of Nine per centum
Debentures
(9.00%) per annum payable annually, for two Interest Periods on the said
Debentures.
COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021 7Contents
ISSUE AT A GLANCE ........................................................................................................................................................ 6
1.0 CORPORATE INFORMATION .............................................................................................................................. 10
2.0 RELEVANT PARTIES TO THE ISSUE...................................................................................................................... 12
3.0 ABBREVIATIONS USED IN THE PROSPECTUS ...................................................................................................... 13
4.0 GLOSSARY OF TERMS RELATED TO THE ISSUE.................................................................................................... 14
5.0 ISSUE DETAILS ................................................................................................................................................... 16
5.1 ISSUE SUMMARY ................................................................................................................................... 16
5.2 OBJECTIVES OF THE ISSUE AND SPECIFIC RISKS RELATING TO THE OBJECTIVES .................................................... 16
5.3 NATURE OF THE NEW DEBENTURES ........................................................................................................... 18
5.4 SIZE OF THE ISSUE .................................................................................................................................. 18
5.5 INTEREST RATE OPTIONS ......................................................................................................................... 18
5.6 GUARANTEED DEBENTURE ....................................................................................................................... 19
5.7 LISTING ................................................................................................................................................ 19
5.8 PAYMENT OF PRINCIPAL AND INTEREST ...................................................................................................... 20
5.9 REDEMPTION ........................................................................................................................................ 20
5.10 TRUSTEES TO THE OFFERING ..................................................................................................................... 21
5.11 COST OF THE ISSUE................................................................................................................................. 21
5.12 BROKERAGE .......................................................................................................................................... 21
5.13 RIGHTS OF DEBENTURE HOLDERS .............................................................................................................. 21
5.14 CREDIT RATING ..................................................................................................................................... 22
5.15 TRANSFER OF DEBENTURES ...................................................................................................................... 23
5.16 SUBSCRIPTION LIST AND CLOSURE DATE ..................................................................................................... 23
5.17 INSPECTION OF DOCUMENTS.................................................................................................................... 24
5.18 RISKS RELATED TO THE DEBENTURES ......................................................................................................... 24
6.0 APPLICATION PROCEDURE ...................................................................................................................................... 26
6.1 ELIGIBLE APPLICANTS.............................................................................................................................. 26
6.2 APPLICATION METHODOLOGY ................................................................................................................... 26
6.2.1 How to Apply ................................................................................................................................. 27
6.2.2 Minimum Subscription and Underwriting ..................................................................................... 27
6.2.3 Identification Information ............................................................................................................. 27
6.2.4 Margin Trading ............................................................................................................................. 28
6.2.5 Applications Made Under Power of Attorney................................................................................ 29
6.2.6 Joint Applications .......................................................................................................................... 29
6.2.7 Submission of Applications ............................................................................................................ 29
6.3 PAYMENT OF APPLICATION MONIES .......................................................................................................... 29
6.3.1 Mode of Remittance ...................................................................................................................... 29
6.3.2 RTGS Transfers .............................................................................................................................. 30
6.3.3 Cheques or Bank Drafts – Resident Sri Lankan Investors .............................................................. 30
6.3.4 Foreign Currency Remittance ........................................................................................................ 31
6.3.5 Restrictions Applicable to Foreign Citizens Resident in Sri Lanka .................................................. 31
6.3.6 Bank Guarantees ........................................................................................................................... 32
6.4 REJECTION OF APPLICATIONS ................................................................................................................... 32
6.5 BANKING OF PAYMENTS .......................................................................................................................... 33
6.6 RETURNING OF MONIES OF REJECTED APPLICATIONS .................................................................................... 33
6.7 ALLOTMENT OF DEBENTURES IN ISSUE/BASIS OF ALLOTMENT ........................................................................ 33
6.8 REFUNDS ON APPLICATIONS ..................................................................................................................... 33
6.8.1 Refunds via SLIPS ........................................................................................................................... 34
6.9 SUCCESSFUL APPLICANTS AND CDS LODGEMENT ......................................................................................... 34
6.10 DECLARATION TO THE CSE AND SECONDARY MARKET TRADING ..................................................................... 35
7.0 COMPANY INFORMATION ................................................................................................................................. 36
8.0 FINANCIAL INFORMATION ................................................................................................................................ 37
8.1 DETAILS OF BORROWINGS OF COMMERCIAL CREDIT & FINANCE PLC AS AT 31ST DECEMBER 2020 ....................... 37
8.2 LITIGATION, DISPUTES AND CONTINGENT LIABILITIES ..................................................................................... 37
8.3 DEBT SERVICING DETAILS OF THE COMPANY ................................................................................................ 38
8.4 OTHER DEBT SECURITIES ......................................................................................................................... 38
8.5 FINANCIAL RATIOS OF COCR .................................................................................................................... 38
8.6 THE COVID 19 IMPACT ON THE COMPANY AND IT’S OPERATIONS ................................................................... 39
8 COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 20218.7 ACCOUNTANT’S REPORT AND 5 YEAR SUMMARY ............................................................................................ 40
ANNEX I – STATUTORY DECLARATIONS ........................................................................................................................... 49
ANNEX II – CREDIT RATING REPORT ................................................................................................................................. 51
ANNEX III – COLLECTION POINTS ..................................................................................................................................... 55
Annex IV – Custodian Banks ........................................................................................................................ 59
COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021 91.0 CORPORATE INFORMATION
The Company Commercial Credit and Finance PLC
Legal Form of the Commercial Credit and Finance PLC was incorporated as a Private Limited Liability
Company Company under the Companies Act No. 17 of 1982 on 4 October 1982 and converted
to a Public Company on 16 December 1989 and re-registered under the Companies
Act No. 07 of 2007 on 8 April 2008.
A Registered Finance Company under the Finance Companies Act No. 78 of 1988
and re-registered under the Finance Business Act No. 42 of 2011.
A Registered Finance Leasing establishment under the Finance Leasing Act No. 56 of
2000(as amended). The Shares of the Company were listed on Dirisavi Board of the
Colombo Stock Exchange on 1 June 2011. The Stock Exchange code for the Company
share is “COCR”.
Regulatory Licence The Company operates under the authority of the licence issued by Monetary Board
of Central Bank of Sri Lanka. The licence issued is a continuous licence and doesn’t
have an expiry date.
Company Registration PB 269 PQ
No.
Issuer Rating [SL]BBB with Negative outlook by ICRA Lanka Ltd
Place of Incorporation Kandy, Sri Lanka
Registered Office Commercial Credit & Finance PLC
No. 106, Yatinuwara Veediya, Kandy.
T: + 94 (0) 81 2 000 000
F: +94 (0) 81 2 234 977
E: ccl@cclk.lk
W: www.cclk.lk/
Company Secretary Jacey & Company
No. 9/5, Thambiah Avenue,
Colombo 07
Tel: 011 433 5159/ 011 242 2601
Fax: 0094 11 269 2677
Auditors to the M/s. Ernst & Young
Company Chartered Accountants
No. 201, De Saram Place
Colombo 10
Tel: 011 246 3500
Fax: 011 269 7369
Credit Rating Agency ICRA Lanka Limited
# 10-02 East Tower, World Trade Center,
Colombo 01,Sri Lanka.
Telephone : + 94 11 4339907
Fax: + 94 11 4235636
Bankers Bank of Ceylon
Cargills Bank Limited
Commercial Bank of Ceylon PLC
Hatton National Bank PLC
10 COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021National Development Bank PLC
Nations trust Bank PLC
Pan Asia Banking Corporation PLC
People’s Bank
Sampath Bank PLC
National Development Bank PLC
Seylan Bank PLC
Board of Directors
Mr. E.D.P Soosaipillai Chairman
Mr. R.S Egodage Chief Executive Officer
Mrs. G.R Egodage Executive Director
Mr. R.C Chitty Executive Director
Mr. P.T Fisher Non – Executive Director
Mr. K.D.V Weele Non-Executive Director
Mr. B.B Zschorsch Non-Executive Director
Mr. L.L.S Wikremasinghe Independent Non-Executive Director
Ms. T.M.L Paktsun Independent Non-Executive Director
COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021 112.0 RELEVANT PARTIES TO THE ISSUE
Managers to the Issue Capital Alliance Partners Limited
Level 5, “Millennium House”,
46/58, Navam Mawatha,
Colombo 02.
T: +94 11 2317777
F: +94 11 2317788
Lawyer to the Issue Nithya Partners
97 A, Galle Road,
Colombo 03.
T: +94 11 4712625
F: +94 11 2328817
Registrar to the Issue S S P Corporate Services (Pvt.) Limited
101, Inner Flower Road,
Colombo 03.
T: +94112 573 894
F: +94112 573 609
Bankers to the Issue Hatton National Bank PLC
HNB Towers, 479, T. B. Jayah Mawatha,
Colombo 10.
T:+94 11 2664664
F:+94 11 2662814
Trustee to the Issue NSB Fund Management Co Ltd
No 400, Galle Road,
Colombo 03.
T:+94 11 2664664
F:+94 11 2662814
Auditor and Reporting Accountant M/s. Ernst & Young
to the Issue Chartered Accountants
No. 201, De Saram Place
Colombo 10
Tel: 011-2573008
Fax: 011-2379333
Rating Agency to the ICRA Lanka Limited
Issue #10-02 East Tower,
World Trade Centre,
Colombo 01.
T: + 94 11 4339907
F: + 94 11 2333307
12 COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 20213.0 ABBREVIATIONS USED IN THE PROSPECTUS
AER Annual Effective Rate
ATS Automated Trading System
AWPLR Average Weighted Prime Lending Rate
CAL Capital Alliance Partners Limited
CBSL Central Bank of Sri Lanka
CDS Central Depository Systems (Private) Limited
CSE Colombo Stock Exchange
FY Financial Year
COCR Commercial Credit and Finance PLC
LCB Licensed Commercial Bank
ICRA ICRA Lanka Limited
NIC National Identity Card
POA Power of Attorney
RGFCA Resident Guest Foreign Currency Account
Rs./LKR Sri Lankan Rupees
SEC Securities and Exchange Commission of Sri Lanka
SIA Securities Investment Account
SLIPS Sri Lanka Interbank Payment System
USD US Dollar
VAT Value Added Tax
WHT Withholding Tax
YoY Year on Year
IIA Inward Investment Account
FCBU Foreign Currency Banking Units
RGRCA Resident Guest Rupee Currency Account
COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021 134.0 GLOSSARY OF TERMS RELATED TO THE ISSUE
Applicant/s Any investor who submits an Application Form under this Prospectus
Application
The application form that constitutes part of this Prospectus through
Form/Application
which the investors may apply for the Debentures in issue
Board/Board of
The Board of Directors of Commercial Credit and Finance PLC
Directors/Directors
The date of closure of the subscription list as set out in Section 5.16 of
Closure Date
this Prospectus
The date on which the Debentures will be allotted by the Company to
Date of Allotment
Applicants subscribing hereto
The date on which Redemption of the Debentures will take place as
Date of Redemption
referred to in Section 5.9
All of Senior Listed Redeemable Rated Guaranteed Debentures 5 year
Debentures
(2021/2026) Debentures to be issued pursuant to this Prospectus
Entitlement Date The Market day immediately preceding the Interest Payment Date
The dates on which the interest payment shall fall due in respect of the
Debentures, being annually at the expiration of every Twelve (12)
month period commencing from the Date of Allotment of the
Interest Payment Date
Debentures and thereafter. Interest would be paid within three (03)
market days from each interest payment date (Excluding such interest
payment date)
The Twelve (12) month period from the date immediately succeeding
a particular Interest Payment Date and ending on the next Interest
Payment Date (inclusive of the aforementioned commencement date
and end date) and shall include the period commencing from the Date
of Allotment and ending on the first Interest Payment Date (inclusive
Interest Period
of the aforementioned commencement date and end date) and the
period from the date immediately succeeding the last Interest Payment
Date before the Date of Redemption and ending on the date
immediately preceding the Date of Redemption (inclusive of the
aforementioned commencement date and end date).
Local Time Sri Lanka Time (UTC+05:30)
Market Day Any day on which CSE is open for trading
Prospectus This Prospectus dated 19 February 2021
The repayment of Principal at maturity together with any interest
Redemption
accruing up to that time
Pursuant to the Letter of Guarantee issued by Hatton National Bank
PLC (The Guarantor) to NSB Fund Management Co Ltd (‘the Trustee’),
Guaranteed Debentures up to an amount of Rupees Two Billion and Three Hundred Sixty Million
(LKR 2,360,000,000) being the principal sum and two interest payments
at the Rate of Nine per centum (9.00%) per annum payable annually,
14 COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021for two Interest Periods on the said Senior Listed Redeemable Rated
Guaranteed debentures to be issued by the Company at an Issue Price
of LKR 100/- each has been guaranteed.
Trust Deed dated 15 February 2021 between Commercial Credit &
Trust Deed
Finance PLC and the Trustee (NSB Fund Management Co Ltd)
The Company/Issuer/COCR Commercial Credit and Finance PLC
Letter of Guarantee executed between Hatton National Bank PLC and
Letter of Guarantee
NSB Fund Management Co Ltd on 12 February 2021
COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021 155.0 ISSUE DETAILS
5.1 Issue Summary
The Board of Directors of COCR on 01 December 2020 resolved to borrow from the public, LKR
1,000,000,000 (Rupees One Billion) with an option to raise a further LKR 1,000,000,000 (Rupees One
Billion) in the event of the oversubscription of the initial issue by way of issuing Senior Listed
Redeemable Rated Guaranteed Debentures Five (5) year Debentures as outlined in this Prospectus.
The below mentioned Debentures will be offered to the public:
Tenure Interest rate Issue Price Par Value
5 Years Fixed rate of 9.00% per annum payable LKR100.00 LKR100.00
(2021/2026) Annually (AER of 9.00%)
These Debentures will be listed on the CSE.
The Company has obtained approval for the proposed debenture issuance from Central Bank of
Sri Lanka.
The face value shall be Rupees Two Thousand Million (LKR 2,000,000,000).
The public could subscribe for any number (subject to the minimum subscription and the maximum
issue value) Debentures mentioned above. The minimum subscription would be Rupees Ten
Thousand (LKR10,000) and thereafter in multiples of Rupees Ten Thousand (LKR10,000).
5.2 Objectives of the Issue and Specific Risks Relating to the Objectives
The funds raised through the Debenture Issue will be utilised to finance expansion by increasing
the lending portfolio of the Company within 06 months from the Date of Allotment. The proposed
debenture issued up to a maximum of LKR 2.0 billion (Rupees Two Thousand Million) through this
Prospectus would be utilised for the purpose mentioned below:
- Supporting the expansion of lending portfolio of the company
(The Company anticipates a strong demand for lending products such as auto loans and gold
loans thus wishes to utilize the debenture proceeds by focusing on the expansion of gold/auto
loan portfolio.
Total Total Total Total Total
disbursemen disbursemen disbursemen disbursemen disbursemen
LKR Bn
ts as of 31 ts as of 31 ts as of 31 ts as of 31 ts as of 31st
March 2016 March 2017 March 2018 March 2019 March 2020
Loans &
52 71 61 56 34
advances
Lease 12 13 12 13 20
Total 64 84 73 69 54
16 COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021Average Total disbursements schedule included above indicates that the amount raised through the
debenture is only 0.029x the average total funding requirement for the year to facilitate the Loans and
lease disbursements (based on 5 year total disbursement average)
Further, in terms of the Articles of Association of the Company shareholder approval is not
required for this Debenture issue.
It is the understanding of the Company that the above mentioned objectives of the debenture
issue will be achieved during the specified timelines, i.e. within 06 months as there is a strong
growth in loans by private sector.
However, if COCR fails to lend these funds to the expansion of loan portfolio due to a systematic
risk (which is an improbable occurrence), COCR would opt to invest the Debenture proceeds in
Government securities at zero default risk until funds are fully utilised. Investment in Government
Securities are expected to generate a return of 6.00%p.a. at current rates. In the event the company
does not utilize the funds for the stated Debenture Issue objective and proposes to use the same
for another objective that such change shall be done only after the company announcing the same
and receiving necessary approvals from relevant authorities/parties. The Company, as at the date
of the Prospectus has not recognized related parties for the lending of the proceeds of the Issue.
As such, the Company will disburse the proceeds of the Issue in the ordinary course of business.
However, in the event, funds are lent to related parties in future, such lending will be done in
accordance with Section 9 of the CSE Listing Rules.
Related Party Transaction
Review Committee
Executive/Non – Executive/Independent
Members as at 31st
December 2020
Ms. T.M.L Paktsun Committee Chairman-Independent Non-Executive Director
Mr. L.L.S Wikremasinghe Independent Non-Executive Director
Mr. R.C Chitty Executive Director
The Company undertakes to disclose the progress of the utilization of proceeds in the format
outlined below, in all of their future interim and annual financial statements, until funds are fully
utilized for the respective objectives stated in the Prospectus.
Debenture Issue proceeds utilization as at dd-mm-yyyy
Objective Objective Amount Proposed Amount % of total Amount % of Clarification
number as per allocated date of allocated proceeds utilized Utilized if not fully
Prospectus as per utilization in LKR (A) in LKR against utilized
prospectus (B) allocation including
in LKR (B/A) where are
the funds
invested
(e.g.
whether
lent to
COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021 17related
party/s
etc.).
1
In the event the proceeds raised are fully utilized in terms of the objectives disclosed in the
prospectus between two financial periods, the Entity shall disclose such fact in the immediate
succeeding Annual Report or the Interim Financial Statement, whichever is published first.
5.3 Nature of the New Debentures
This is an issue of Twenty Million (20,000,000) Senior Listed Redeemable Rated Guaranteed Five (5)
year (2021/2026) Debentures, repayment of capital at maturity and interest payable annually until
expiry to be issued at par LKR 100.00 (Sri Lankan Rupees One Hundred) per each Debenture and
redeemed at par at LKR 100.00 each. Fixed rate of 9.00% p.a. payable annually (AER: 9.00%).
Senior Listed Redeemable Rated Guaranteed Debentures issued under the prospectus are not
subject to an early redemption or have an “convertible option”. However, Debentures shall become
immediately payable at the option of the Trustee on the occurrence of event of default as specified
in Clause 10 of the trust deed. This debenture is not collateralized by any asset of the company,
However debenture holders will be entitled to claim on the guarantee of Hatton National Bank PLC
through the Trustee in the event the Company fails or neglects to redeem the said Debentures or
pay the interest on the said Debentures in terms of Clause 4.1 a) i, ii ,iv, v and vi of the said Trust
Deed or in the event there is an Event of Default as specified in Clause 10 of the said Trust Deed.
5.4 Size of the Issue
If the Twenty Million (20,000,000) Debentures are fully subscribed the issue would raise Rupees
Two Thousand Million (LKR 2, 000,000,000) in total.
5.5 Interest Rate Options
Fixed Coupon Rate of 9.00% p.a. payable annually (AER :9.00%)
The interest payments in respect of the Debentures will be as follows:
The annual interest payment for the debenture would fall on the expiry of every twelve (12) months
from the Date of Allotment of the Debentures until the Date of Redemption and will be payable
no later than three (3) market days from the due date (Excluding such due date). The company
undertakes to inform the CSE via a market announcement, of instances if the interest is not paid to
the debenture holders on the due date.
18 COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021The first interest payment in respect of Debentures shall fall due on the date of expiry of Twelve
(12) months from the Date of Allotment. The final interest payment will be paid with the Principal
Sum on the Date of Maturity/Redemption of the Debentures.
The interest calculation will be based upon the actual number of days in each interest payment
period (Actual/Actual).
Any statutory taxes and/or dues that may be applicable at the time of the interest payment will be
deducted.
5.6 Guaranteed debenture
Pursuant to the Letter of Guarantee issued by Hatton National Bank PLC (The Guarantor) to NSB
Fund Management Co Ltd (‘the Trustee’), an amount of Sri Lankan Rupees Two Billion Three
Hundred and Sixty Million (LKR 2,360,000,000) being the principal sum and two interest payments
payable annually on the Twenty Million (20,000,000) Senior Listed Redeemable Rated Guaranteed
debentures to be issued by the Company at an issue price of LKR 100/- each has been guaranteed.
Accordingly, an amount not exceeding Sri Lankan Two Billion Three Hundred and Sixty Million (LKR
2,360,000,000) may be claimed by the Trustee for and on behalf of the Debenture Holders from
the Guarantor in the event the Company fails or neglects to redeem the said Debentures or pay
the interest on the said Debentures in terms of Clause 4.1 a) i, ii ,iv, v and vi of the said Trust Deed
or in the Event of Default as specified in Clause 10 of the said Trust Deed.
In the event the Trustee recovering or receiving any monies from the Guarantor or consequent to
any action or proceedings taken by the Trustee against the Guarantor the Trustee shall apply such
monies in or towards settling or providing for the payment of any outstanding interest for two
interest payments at a maximum Interest Rate of 9.00% p.a. Interest for two Interest periods which
is payable by the Company to the Debenture holders and thereafter for the payment of principal
sum which is payable by the Company to the Debenture Holders in proportion to their investment
respectively subject however up to the aggregate amount to Sri Lankan Rupees Two Billion Three
Hundred and Sixty Million (LKR 2,360,000,000) specified in the Letter of Guarantee (clause 3.2 of
the Trust Deed).
A copy of the Letter of Guarantee is annexed to the Trust deed and the Trust Deed shall be hosted
on the website of the Colombo Stock Exchange (www.cse.lk).
5.7 Listing
An application has been made to the CSE for permission to deal in and obtain a listing for these
Senior Listed Redeemable Rated Guaranteed Debentures at a par value of LKR100/- each, all of
which are offered to the public by way of this Debenture issue and has been approved in principle.
However, the CSE reserves the right to withdraw such approval, in the circumstances set out in Rule
2.3 of the Listing Rules of the CSE.
COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021 19The CSE however, assumes no responsibility for the correctness of the statements made or opinions expressed or reports included in this Prospectus. A Listing on the CSE is not to be taken as an indication of the merits of Commercial Credit & Finance PLC or of the Debentures issued. 5.8 Payment of Principal and Interest Payment of Principal and interest will be made in Sri Lankan Rupees after deducting any taxes at source and charges thereon (if any) to the Debenture holders registered as at the Entitlement Date. (In case of joint Debenture holders, the payment will be made to the one whose name stands first in the Register of Debenture Holders). In the event accurate bank account details are provided to the CDS by the Debenture Holders, the payment of principal sum and interest shall be made to Debenture holders through an electronic fund transfer mechanism recognized by the banking system of Sri Lanka such as RTGS (arranged only at the expense of the investor) or SLIPS. RTGS transfers however shall be accommodated only for amounts over and above the maximum value of Rupees Five Million that can be accommodated via SLIPS transfers. If the Debenture holder has not provided to the CDS accurate and correct details of his/her/its/their bank account/s for the payment of principal sum and interest, such payment to the Debenture holder will be posted to the address registered with the CDS through registered post to the Debenture holder, by crossed cheques marked “Account Payee Only”. For all Debentures Interest payable will be made only by cheques within three (3) market days from the end of each period. In order to accommodate the Debenture interest cycles in the CDS, interest payments shall not include the Debenture holders holding Debentures in the CDS as at the last day of the Payment Cycle but one day prior to the Interest Payment Date. 5.9 Redemption The Debentures are redeemable at the maturity on the expiry of five (5) years from the Date of Allotment in accordance with the provisions contained in the Trust Deed. The Debenture Holders shall not have any right or option to call for redemption of the Debentures before the date of maturity of such Debentures, except in the circumstances where the Debentures have become immediately payable in terms of Clause 10 of the Trust Deed. Please refer section 5.18 risks related to the debenture sub section 6: Call risk for further clarification. On the date of maturity/redemption of the Debentures, the Company shall in accordance with the provisions contained in the Trust Deed pay to the Debenture Holders the principal sum of the Debentures which ought to be redeemed and interest (if any) remaining unpaid up to the date of maturity/redemption of the Debenture. If the Date of Redemption falls on a day which is not a Market Day, then the Date of Redemption shall be the immediately succeeding Market Day and for the avoidance of doubt interest shall be 20 COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021
paid for the intervening days which are not Market Days. For the avoidance of doubt it should be
noted that no interest on interest would be payable for the aforesaid interim period.
5.10 Trustees to the offering
NSB Fund Management Co Ltd, No 400, Galle Road, Colombo 03 has agreed in writing to act as
the Trustee to the Debenture issue and has issued a consent letter to this effect. The Company has
entered into an agreement with the Trustee (hereinafter called the “Trust Deed”). Debenture
Holders in their application for subscription will be required irrevocably to authorise the Trustee,
subject to overriding clauses in the Trust Deed, to act as their agent in entering into such deeds,
writings, instruments with the Company and to act as agents and Trustees for the debenture
holders in order to facilitate the protection of the debenture holder’s investment and return.
The rights and obligations of the Trustee are set out in the Trust Deed, a copy of which is available
for inspection as mentioned in Section 5.17 of this Prospectus. The Debentures shall be subject to
the terms and conditions and confer such rights as are incorporated in the said Trust Deed. There
is no conflict of interest arising between the Trustee or its Directors and the Entity.
5.11 Cost of the Issue
The directors estimate that the total cost of the issue including the Listing fee, Trustee fee,
Brokerage, Printing, Marketing, Managers and Registrars fees and other costs connected with the
issue will be approximately LKR 20 million and will be funded by Commercial Credit & Finance PLC.
5.12 Brokerage
Brokerage at the rate of 0.15 per centum of the investment value of the Debentures will be paid in
respect of the number of Debentures allotted on applications bearing the stamp of any member
and trading member of the CSE and any agent appointed by the Company.
5.13 Rights of Debenture holders
Debenture holders are entitled to the following rights
Receive principal on the date of maturity/redemption and interest on the Debentures as per
Sections 5.5, 5.8 and 5.9 of this Prospectus and the provisions contained in the Trust deed.
(In the event of liquidation, Senior Listed Redeemable Rated Guaranteed Debentures
Debentures will rank pari passu to all the claims of unsecured creditors and preferential
claims under any Statutes governing the Company but rank in priority over the claims of any
subordinated debt of the Company and the ordinary and preference shareholder/s of the
Company.
Call, receive notice, attend and vote at the meetings of the Debenture holders in
accordance with the provisions contained in the Trust Deed pertaining to this Debenture
issue.
The other rights of the holders of these Debentures are set out in the Trust Deed.
To receive a copy of the Annual Report within 5 months from the financial year end as set
out under rule 7.5 of CSE Listing Rules.
COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021 21 The debenture holders will be entitled to claim on the guarantee of Hatton National Bank
PLC through the Trustee in the event the Company fails or neglects to redeem the said
Debentures or pay the interest on the said Debentures in terms of Clause 4.1 a) i, ii ,iv, v and
vi of the said Trust Deed or in the event there is an Event of Default as specified in Clause 10
of the said Trust Deed
Debenture holders are NOT entitled to the following rights
Attending and voting at meetings of holders of shares and other types of debentures.
Sharing in the profits of the Company
Participating in any surplus in the event of liquidation
Obligations on the Debentures
The Company shall repay the principal sum on the date of maturity/redemption and interest
on the Debentures as per Sections 5.5, 5.8 and 5.9 of this Prospectus and the provisions
contained in the Trust Deed and comply with all other terms and conditions stipulated in the
Trust Deed in respect of these Debentures.
When making payment of the principal sum and interest on the Debentures, the Company
shall always act on the information furnished by the CDS and it shall be the responsibility/
obligation of each Debenture Holder to keep all the information in respect of such Debenture
holder updated in the CDS. Each Debenture Holder shall absolve the Company from any
responsibility or liability in respect of any error or absence of necessary changes in the
information recorded with the CDS. In addition, the Debenture Holder shall absolve CDS and
CSE from any responsibility or liability in respect of any error or absence of any necessary
changes initiated by the Debenture Holder in the information recorded with the CDS.
Benefits of investing in debentures offered by the company
Provides an opportunity to diversify the investment portfolio of the investor.
Provides the investor with a regular cash inflow of interest payments
Provides the investor with an opportunity to invest in Debentures issued by a leading
Company in Sri Lanka.
Being listed on the CSE, the Debentures will have a secondary market, thus providing the
investor with an opportunity to exit at the market price prevailing at the time of divestiture.
The Debentures may be used as collateral to obtain credit facilities from banks and financial
institutions.
5.14 Credit Rating
ICRA Lanka Limited has assigned [SL]AA(CE) with stable outlook rating to the Company’s Senior
Listed Redeemable Rated Guaranteed debentures from the report dated 17 February 2021 The
rating report issued by ICRA Lanka Limited is set out in Annexure II of this Prospectus.
Board of Directors of the Company undertakes to keep the trustees and CSE informed of any
changes to the credit rating of the debentures if any of the directors are aware/being notified of
such changes to the rating.
22 COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 20215.15 Transfer of Debentures
These Debentures shall be freely transferable as long as the Debentures are listed in the CSE
and the registration of such transfer shall not be subject to any restriction, save and except
to the extent required for compliance with statutory requirements.
Subject to provisions contained in the Trust Deed, the Company may register without
assuming any liability any transfer of Debentures, which are in accordance with the
statutory requirements and rules and regulations in force for the time being as laid down by
the CSE, SEC and the CDS
In the case of the death of a Debenture Holder
o The survivor where the deceased was a joint holder; and
o The executors or administrators of the deceased (or where the administration of the
estate of the deceased is in law not compulsory, the heirs of the deceased) where such
Debenture Holder was the sole or only surviving holder; shall be the only persons
recognised by the issuer as having any title to his/her Debentures.
Any person becoming entitled to any Debenture in consequence of bankruptcy or winding
up of any Debenture holder, upon producing proper evidence that such debenture holder
sustains the character in respect of which such debenture holder proposes to act or such
debenture holder’s title as the Board of Directors of the Company thinks sufficient, may at
the discretion of the Board be substituted and accordingly, registered as a Debenture holder
in respect of such Debentures subject to the applicable laws, rules and regulations of the
Company, CDS, CSE and SEC.
No change of ownership in contravention of the above conditions will be recognised by the
Company.
5.16 Subscription List and Closure Date
The subscription list for the Senior Listed Redeemable Rated Guaranteed Debentures pursuant to
this Prospectus will open at 9.00 a.m. on 24 February 2021 and shall remain open for fourteen (14)
market days until closure at 4.30 p.m. on 17 March 2021.
However, in the event of an over subscription of the Twenty Million (20,000,000) Debentures, the
subscription list will close at 4.30 p.m. on the same day on which it is fully subscribed, with the
notification of CSE.
The Subscription List may be closed on an earlier date at 4.30 p.m. on the following market day
with notification to the CSE in an instance the Board of Directors of the Company decides to close
the issue upon the initial issue of Sri Lankan Rupees One Billion (LKR 1,000,000,000) becoming fully
subscribed.
In the event of an oversubscription of the initial issue if the Company exercises the option to
increase the issue by a further Ten million (10,000,000) Debentures and decides to close the issue
prior to the said Ten million (10,000,000) Debentures being fully subscribed the subscription list
will close at 4:30 p.m. on the market day succeeding the date of notification made to the CSE.
COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021 23Applications may however be made forthwith in the manner set out in Section 6.0 and accordingly, duly completed application forms will be accepted from (Applications available dates), by Managers to the issue, Registrars to the Issue or by any member/trading member firm of the CSE as set out in the Collection Points of Annex III of this Prospectus. 5.17 Inspection of Documents Certified copies of the Articles of Association of the Company, the Audited financial statements of the Company for the last five years ending 31 March, 2016, 2017, 2018, 2019 and 2020 Rating Report, Trust Deed, Material contracts and management agreements or in the case of contracts not reduced into writing a Memorandum giving full particulars thereof and all other documents pertaining to the Company to which references are made in this Prospectus could be inspected by the public during normal business hours at the Registered Office of Commercial Credit & Finance PLC from the date hereof, until the date of maturity of the Debentures issued. In terms of Rule 3.3.13 (b) of the CSE Listing Rules; the Prospectus, Articles of Association of the Company and the Trust Deed are also hosted in the Company’s website, www.cclk.lk, and the CSE website www.cse.lk from the date of opening of the subscription list until the date of maturity of the debt security. 5.18 Risks Related to the Debentures 1. Reinvestment Risk Interests on the Debentures are payable annually. An investor may decide to reinvest this interest payment and earn interest from that point onwards until maturity. Depending on the prevailing interest rates at the point of reinvestment, the interest rates at which Debenture Holders will reinvest such interest received being higher or lower than the return offered by the Debentures is known as reinvestment risk. 2. Interest Rate Risk The price of a typical debenture will have a negative correlation with the market interest rates. Interest rate risk captures this relationship between market interest rates and the value of Debentures. If market interest rates rise, the value of the Debentures may fall: as market interest rates fall the value of Debentures may rise (all other factors being equal). If the investor wishes to sell the Debenture prior to its maturity, he might be facing a capital loss (gain) if the market interest rates have increased (decreased) subsequently. Interest rate risk is irrelevant for the investor who wishes to hold the Debenture till maturity. 3. Credit Risk Risk of the issuer not being able to pay interest and principal payments as promised on a timely basis is default risk/credit risk. It is advisable for prospective investors of the Debenture to take into account the credit rating awarded to the Company and to its Debentures by ICRA Lanka Ltd, present financial strength as reflected in the Balance Sheet of the Company, asset and earnings growth and experience and skills of the Directors and senior management when forming an 24 COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021
opinion on default risk. ICRA Lanka Limited has assigned a credit rating of [SL]AA(CE) with stable
outlook for COCR Debenture issue (Refer Annex II for Rating Report) and this credit rating will be
reviewed periodically.
4. Liquidity Risk
Liquidity risk refers to the ease with which the debenture can be sold in the secondary market, after
the initial placement. Since the COCR Debentures are listed, should an investor require an exit
option, they will be able to sell the Debentures through the CSE in order to convert them to cash
and exit from the investment. Therefore, the liquidity risk is mitigated to a greater degree in the
COCR Debenture. Investors have to be mindful of the fact that even though the Debentures are
listed, trading of listed debt is not at an advanced stage as the equity markets in Sri Lanka.
5. Inflation Risk
An increase in inflation rates will cause a decrease in the real value of coupon cash flows of the
debenture. The Debenture which offers the fixed coupon is subject to inflation risk since the interest
rates are not adjusted upwards depending on the inflation rate.
6. Call Risk
Call risk refers to the risk that the issuer will retire all of the principal value of the debentures before
maturity. Senior Listed Redeemable Rated Guaranteed Debentures issued under the prospectus
are not subject to an early redemption. However, Debentures may become immediately payable at
the option of the Trustee on the occurrence of event of default as specified in Clause 10 of the
trust deed. The risk to investor is in that, the timing of the occurrence of event of default is not
known and the investor will be faced with a re-investment risk in the event of occurrence of such
event at a time when the market interest rates have declined.
COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021 256.0 APPLICATION PROCEDURE
6.1 Eligible Applicants
Applications are invited from the following categories of investors:
Citizens of Sri Lanka who are resident in Sri Lanka and above 18 years of age; or
Companies, corporations or institutions incorporated or established within Sri Lanka; or
Approved Unit Trusts licensed by the SEC; or
Approved provident funds and contributory pension schemes registered/incorporated/
established in Sri Lanka (in this case, Applications should be in the name of the Trustee/Board
of Management in order to facilitate the opening of the CDS account)
Foreign citizens above 18 years of age (irrespective of whether they are resident in Sri Lanka
or overseas); or
Global, regional and country funds approved by the SEC; or
Non-residents: foreign institutional investors, corporate bodies incorporated or established
outside Sri Lanka, individuals and Sri Lankans resident outside Sri Lanka.
Please note that Applications made by individuals less than 18 years of age or those in the names
of sole proprietorships, partnerships, unincorporated trusts and non-corporate bodies will be
rejected.
“Individuals resident outside Sri Lanka” will have the same meaning as in the notice published
under the Exchange Control Act in Gazette No. 15007 dated 21st April 1972.
When permitting Non-Residents to invest in the Debentures, the Company will comply with the
relevant Exchange Control Regulations including the conditions stipulated in the notice under the
Exchange Control Act with regard to the issue and transfer of debentures of companies
incorporated in Sri Lanka to foreign investors as published in the Government Gazette
(Extraordinary) No. 1681/11 on 22nd November 2010, Government Gazette (Extraordinary) No.
1733/19 on 22nd November 2011 and Government Gazette (Extraordinary) No. 1864/39 on 28th
May 2014.
6.2 Application methodology
Applicants applying for the New Debentures should submit their Applications in the manner as set
out in this Prospectus.
The Prospectus will be made available free of charge from the collection points listed in Annex III.
The Prospectus can also be downloaded from www.cse.lk and the Company website www.cclk.lk
26 COMMERCIAL CREDIT AND FINANCE PLC – DEBENTURE ISSUE 2021You can also read
