MARC AFFIRMS ITS MARC-1ID/AAID AND A+ID RATINGS ON SERRISA SINAR BERHAD'S ISLAMIC DEBT PROGRAMMES

Sep 9, 2011 -
MARC has affirmed the ratings of Serrisa Sinar Berhad’s (Serrisa Sinar) RM200 million ICP/IMTN notes and RM20 million Junior IMTN at MARC-1ID/AAID and A+ID respectively. The outlook of the ratings is stable. The rating action affects RM100 million of outstanding notes issued under the programme. The rating of the Junior Notes reflects its subordination to the Senior Notes in respect of profit payment and principal repayment. Serrisa Sinar was incorporated to issue the Islamic debt to finance the purchase of contract receivables for the completed telecommunication towers from Weida Works Sdn Bhd (Weida Works). Weida Works obtained the rights to finance and construct telecommunication towers or structures in the state of Sabah through its joint-venture with state-backed company, Common Tower Technologies Sdn Bhd (CTT) which holds the exclusive rights to construct and manage telecommunication towers and structures in the state of Sabah.

The affirmed ratings reflect the secured revenue stream backing the notes which consist of monthly lease rentals for completed telecommunication towers from the three mobile operators, Celcom Axiata Bhd, Maxis Broadband Sdn Bhd and DiGi Telecommunications Sdn Bhd. The credit strength of the assigned revenue stream derives from the very strong financial profiles of the mobile operators as well as the predictable lease rentals which are based on agreed upon rates in a long-term licence agreement which will remain in effect throughout the tenure of the programme. The transaction structure provides for the direct payment of all lease rentals into a trustee-controlled collection account, and the transfer of a defined percentage of the collections into a sinking fund account for debt service (60% for the first seven years and 40% thereafter). The balance is made available to Weida Works for its operation and maintenance expenses and payment to CTT. The aforementioned credit strengths are reflected in Serrisa Sinar’s comfortable covenant headroom for its finance service cover ratio (FSCR); its FSCR for the 12 months ended December 12, 2010 (FY 2010) was 5.5 times (x) as compared to its minimum required FSCR of 1.5x.

Since MARC’s last rating action on August 12, 2010, Serrisa Sinar has acquired another 36 towers, bringing the total number of towers financed under the programme to 242. It has repaid notes totalling RM50 million since 2009, leaving outstanding notes at RM100 million. With the expiry of the availability period for further drawdowns under the notes programme in April 2011, no additional notes may be issued under the programme. Total contract receivables (lease payments) declined to RM91.8 million as at end-FY2010 compared to RM94.0 million a year ago. This contributed in part to higher cash and bank balances of RM21.6 million as at end-FY2010 (FY2009: RM14.9 million). Cash flow from operations interest coverage remained unchanged at 1.28 times compared to a year ago. Borrowings are adequately covered by receivables and cash and bank balances; the ratio of receivables and cash/bank balances to borrowings has been maintained above 1x since inception of the programme.

MARC notes that rental payments from the mobile operators have continued to be timely and the stable outlook for the notes incorporates expectations of continued timely payments from the mobile operators for the towers.

Contacts:
Goh Shu Yuan, +603-2082 2268/ shuyuan@marc.com.my;
Francis Xaviour Joe, +603-2082 2279/ fxjoe@marc.com.my.