Tuesday, December 4, 2012

MARC AFFIRMS ITS MARC-1ID/AAID AND A+ID ISLAMIC DEBT RATINGS ON DHTI CAPITAL SDN BHD’S SENIOR AND JUNIOR NOTES


Dec 3, 2012 -

MARC has affirmed the ratings of DHTI Capital Sdn Bhd’s (DHTI Capital) RM110 million Islamic Commercial Papers (ICP)/Islamic Medium Term Notes (IMTN) (collectively referred to as Senior Notes) and RM10 million Junior IMTNs (Junior Notes) at MARC-1ID/AAID and A+ID respectively. The ratings outlook is stable. The rating action affects RM33 million of outstanding notes, comprising RM30 million ICPs and RM3 million Junior Notes.

DHTI Capital is a wholly-owned funding vehicle of D’Harmoni Telco Infra Sdn Bhd (DHTI) that was incorporated to issue the Islamic debts to finance the purchase of receivables in respect of completed telecommunication towers constructed by DHTI. DHTI obtained the rights to build, manage, lease and maintain towers in Johor. The affirmation reflects the credit quality of the assigned rental revenue from 166 completed telecommunication towers which will fund debt service on the rated notes over the remaining tenure of the transaction. The Junior Notes are two notches below the rating of the Senior Notes to reflect its subordination to the Senior Notes in respect of profit and principal payments as well as security.

The stability and predictability of the assigned revenue stream, meanwhile, is derived from the strong financial profiles of the telecommunication companies (telcos) and the agreed lease rental rates in a long-term licence agreement between state-backed telecommunication tower developer DHTI, and three telcos, Celcom Axiata Bhd (Celcom), Maxis Bhd (Maxis) and DiGi Telecommunications Sdn Bhd (DiGi). The rental payments from the telcos are directed into a trustee-controlled collection account, subsequent to which the issuer will direct 60% of total rental payments received into a sinking fund to meet the debt service obligations on the notes while the balance is transferred to DHTI for, among others, maintenance costs. DHTI Capital maintained comfortable covenant headroom with respect to its finance service cover ratio (FSCR) which is computed as net operating cash flow (NCF) and cash balances divided by the total principal and profit due within the corresponding year. The principal portion due shall be nil if the total outstanding ICP/IMTN at the beginning of the financial year is less than the available limit at the end of the financial year. DHTI Capital’s FSCR of 12.48 times (x) for the financial year ended December 31, 2011 (FY2011) was well above its minimum covenant of 1.5x.

DHTI Capital drew down RM20 million on the notes programme in May 2012 to acquire 47 completed towers from DHTI. Going forward, DHTI Capital is not expected to draw down further under the notes programme to finance the purchase of completed towers as no further towers will be constructed beyond the completed 166 towers that were financed by the issuance of the notes under the ICP/IMTN programme and Junior IMTNs. With no further draw down for the acquisition of towers expected going forward, the rental stream from the existing 166 towers will fund debt service on the outstanding notes of RM33 million. Based on projections, DHTI Capital expects to generate NCF of about RM16 million per year from 2012 to 2016, which will adequately address projected repayments of RM5 million to RM15 million on the rated obligations through the remaining tenure of the borrowings. MARC notes that DHTI Capital will face heavier debt repayments of RM15 million each year in 2013 and 2014. The company’s NCF will be augmented by cash and cash equivalent holdings above RM7 million after debt repayments at the end of each financial year for the remaining tenure of the debt.

The stable outlook reflects the expectation of stable and timely lease payments from the telcos for the financed towers.

Contacts:
Se Tho Mun Yi, +603-2082 2263/ munyi@marc.com.my;
Sharidan Salleh, +603-2082 2254/ sharidan@marc.com.my

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