MARC HAS AFFIRMED ITS MARC-1ID/AAID AND A+ID RATINGS ON DHTI CAPITAL SDN BHD ISLAMIC DEBT PROGRAMMES

Oct 10, 2011 -

MARC has affirmed its ratings on special purpose company DHTI Capital Sdn Bhd’s (DHTI Capital) RM110 million Islamic Commercial Papers/Islamic Medium Term Notes (Senior Notes) and RM10 million Junior Islamic Medium Term Notes (Junior Notes) at MARC-1ID/AAID and A+ID respectively. The rating outlook is stable. The rating action affects RM28 million of outstanding notes issued under the programme.

The affirmed ratings reflect the credit quality of the rental payment stream from creditworthy mobile operators as the source of repayment of the notes. The payment stream is backed by a ten-year licence agreement between D’Harmoni Telco Infra Sdn Bhd (DHTI), a Johor state-backed company, and the three main domestic telecommunication operators (mobile operators), Celcom Axiata Bhd, Maxis Broadband Sdn Bhd and DiGi Telecommunications Sdn Bhd, that obligates the mobile operators to make monthly rental payments of defined amounts for usage of telecommunication towers. The credit strength of the assigned revenue stream is derived from the strong financial profiles of the mobile operators as well as the predictable lease rentals. These lease rentals are based on agreed-upon rates in a long-term licence agreement which remains 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%) with the balance made available for operation and maintenance expenses and payment to DHTI. The aforementioned credit strengths are reflected in DHTI Capital’s comfortable covenant headroom for its finance service cover ratio (FSCR); its FSCR for the 12 months ended December 12, 2010 (FY 2010) was 8.95 times (x) as compared to its minimum required FSCR of 1.5x.

DHTI, the parent company of DHTI Capital, is a licensed Network Facilities Providers (NFP) under the Communications and Multimedia Act 1998. As an NFP, DHTI has the sole right to build, manage, lease and maintain telecommunication infrastructures (including towers) in Johor for a period of ten years until 2015. It is 20%-owned by the Johor state government’s wholly-owned subsidiary YPJ Corporation Sdn Bhd, with the remaining equity interest held by Crestcom Sdn Bhd (66.8%) and Duta Harmoni Sdn Bhd (13.2%). DHTI’s 10-year licence agreement with the mobile operators provides visibility and predictability to DHTI Capital’s rental stream throughout the term of the notes. The quantum of rent payable by the mobile operators is determined by factors such as the height of the towers, the number of mobile operators sharing the towers and the variation orders for the towers (if any). The lease rentals are paid into a trustee-controlled collection account from which 60% of the funds are remitted into a sinking fund account for debt service on the notes and the balance, into an operations account for the maintenance of the towers.

To date, DHTI Capital has issued RM55 million in Senior Notes and RM3 million in Junior Notes, backed by 119 towers. As of September 2011, DHTI Capital has paid down RM30 million of the Senior Notes, leaving outstanding Senior Notes of RM25 million and RM3 million in Junior Notes. Borrowings are adequately covered by receivables and cash/bank balances, with the ratio of assets to borrowings 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.