RAM Ratings reaffirms ratings of PINS Capital's ICP/IMTN Programme, revises outlook to negative

Published on 23 February 2012
RAM Ratings has reaffirmed the respective long- and short-term ratings of PINS Capital Sdn Bhd’s (“PINS Cap” or “the SPV”) RM150 million Islamic Commercial Papers/Medium-Term Notes Programme (“ICP/IMTN Programme”), at AA3 and P1. Nonetheless, the outlook on the long-term rating has been revised from stable to negative.

The ratings of PINS Cap’s ICP/IMTN Programme hinge on the credit strength of its counterparties, i.e. cellular operators (“celcos”), which lease the telecommunication infrastructure facilities (“towers”) from Perak Integrated Network Services Sdn Bhd (“PINS”) in exchange for pre-determined monthly licence fees. By virtue of this, RAM Ratings had adopted the weakest-link approach when rating PINS Cap’s debt facility; the ratings reflect those of the SPV’s lowest-rated counterparty. On 23 December 2011, RAM Ratings revised the outlook on the debt ratings of Binariang GSM Sdn Bhd (“BGSM” – the parent company of Maxis Berhad), from stable to negative, reflecting the decline in the BGSM Group’s financial profile over the last few years. In line with the weakest-link approach, we had concurrently revised the outlook on the long-term rating of PINS Cap’s ICP/IMTN Programme, from stable to negative.

PINS Cap – a wholly owned subsidiary of PINS – had been specifically set up for the sole purpose for its parent’s financing needs. Via its licence as a network facility provider – expiring on 10 July 2015 – PINS has the right to construct, own, maintain and lease all towers in the state of Perak. In June 2006, PINS signed a Licence Agreement (“LA”) with the celcos – Maxis Broadband Sdn Bhd (a wholly owned subsidiary of Maxis Berhad), Celcom Axiata Berhad and DiGi Telecommunications Sdn Bhd – for the purpose of constructing and leasing the towers, in exchange for pre-determined monthly licence fees. The LA is, however, not a commitment on the number of towers to be built or any minimum payment to PINS, nor is it exclusive, i.e. the celcos may enter into similar agreements with any third party, share/build towers with any other party, and/or build their own infrastructure.

Aside from the celcos’ credit strengths, the ratings also consider PINS’s favourable business profile given the stable income derived from the towers. Moreover, the SPV is shielded from demand and construction risks given that all issuances under the ICP/IMTN Programme have to be evidenced by the completion and handover of towers. Notably, the risk of cashflow leakage is minimised by the debt facility’s transaction structure, which involves the setting up of a Collection Account (“CA”), into which the celcos will be instructed to remit all monthly proceeds in relation to each tower. Then, 60% of the money in the CA will be deposited into the Sinking Fund Account that has been earmarked for the servicing of PINS Cap’s debt obligations; the remaining 40% will be paid into the Operating Account for the purpose of funding the maintenance and operating expenses of the towers.

Meanwhile, PINS Cap remains exposed to roll-over and interest-rate risks. The roll-over risk is adequately addressed via the unutilised underwritten amount of RM30 million against the current outstanding amount of RM10 million under the ICP/IMTN Programme (as at end-January 2012). Comfort can also be derived from the knowledge that the interest rates payable on the amount drawn down have been within our expectations. Going forward, there will be no further drawdown as the issuance time frame under the ICP/IMTN Programme expired on 14 June 2011.

Media contact
Adelia Abdul Rahim
(603) 7628 1055
adelia@ram.com.my