MARC AFFIRMS ITS AAID RATING ON INSTACOM SPV SDN BHD’S RM200.0 MILLION MURABAHAH MEDIUM TERM NOTES PROGRAMME

Dec 18, 2012 -

MARC has affirmed the rating of Instacom SPV Sdn Bhd’s (ISPV) RM200 million Murabahah Medium Term Notes (MMTN) Programme at AAID with a stable outlook. ISPV is a wholly-owned subsidiary of Instacom Engineering Sdn Bhd (IESB) that was set up solely to facilitate the issuance of the MMTNs to finance the purchase of completed telecommunication (telco) towers constructed by the latter. As of date, ISPV has drawn down RM155 million under the rated programme and has RM31 million MMTNs outstanding.

MARC notes that under the terms of the programme, there shall be no further drawdowns of MMTNs. The company has cash balance of RM22.43 million in its designated accounts as at end-November 2012, which is sufficient to meet the redemption of a total RM21 million MMTNs due in 2013. The affirmed rating continues to be underpinned by the strong rental payment streams from, and the credit strength of, the telco companies, namely Maxis Berhad, Celcom Axiata Berhad and DiGi Telecomunications Sdn Bhd.

Sarawak-based IESB had completed the construction of 84 towers under a turnkey contract from Desabina Industries Sdn Bhd (DISB), a Terengganu state-backed company (SBC), to construct telco towers in Terengganu. The completed towers were then leased for seven years under a licence agreement signed between DISB and the telcos. However, DISB had surrendered its rights to rental payments from the telcos to ISPV for the repayment of the issued notes and, to a lesser extent, maintenance and upkeep of the towers. In addition to telco tower construction, IESB had also constructed 883 telco structures for DiGi which were financed under the rated programme. Upon completion of construction, it received lump sum payments from DiGi.

IESB is no longer constructing any telco towers or structures as both contracts have ended. All assigned revenues arising from tower rentals and construction are being paid into trustee-controlled designated accounts. Over the next 12 months, ISPV’s finance service cover ratio (FSCR) is expected to range between 1.26 times and 3.63 times vis-a-vis the programme’s minimum FSCR covenant of 1.25 times.

The current stable outlook on the rating reflects continued timely payments from the existing towers.

Contacts:

Ngiam Tee Wei, +603-2082 2268/ teewei@marc.com.my;

Taufiq Kamal, +603-2082 2251/ taufiq@marc.com.my.