Bangkok--12 Nov--Fitch Ratings
Fitch Ratings (Thailand) Limited has today affirmed the National ratings of bonds issued by DAD SPV Company Limited (DAD SPV). The transaction is the securitisation programme initiated by the Thai Government and is backed by the 30-year lease and fee payments (lease payments) of the government office centre at Chaeng Wattana. Dhanarak Asset Development Company Limited (DAD), an asset development company wholly-owned by the Ministry of Finance (MoF), is the originator of the transaction as well as the developer and the property manager of the government office centre. The rating actions are as listed below:
THB1.5bn DAD12NA (due November 2012) affirmed at ‘AAA(tha)’; Outlook Stable;
THB2.0bn DAD15NA (due November 2015) affirmed at ‘AAA(tha)’; Outlook Stable;
THB1.8bn DAD20NA (due November 2020) affirmed at ‘AAA(tha)’; Outlook Stable;
THB5.0bn DAD25NA (due November 2025) affirmed at ‘AAA(tha)’; Outlook Stable;
THB2.2bn DAD20NB (due November 2020) affirmed at ‘AAA(tha)’; Outlook Stable;
THB6.0bn DAD25NB (due November 2025) affirmed at ‘AAA(tha)’; Outlook Stable; and
THB5.5bn DAD25NC (due November 2025) affirmed at ‘AAA(tha)’; Outlook Stable.
The rating affirmations and Stable Outlooks are supported by the following factors: long term committed lease payments from the Treasury Department (TD) of the MoF; the ability of the transaction to maintain a debt service coverage ratio of at least 1.0x and to withstand a higher refinancing rate than Fitch’s assumption of 15%; as well as the structure of the transaction. The bonds due in 2025 are subject to refinancing risk; but this is mitigated by a principal accumulation reserve and the lease payments from 2025 onwards.
“The transaction is credit-linked to the credit rating of the TD (which is the sole underlying obligor) as most of DAD SPV’s cash flows come from the lease payments. Under the lease agreements, the lease payments from the TD are unconditional and irrevocable, regardless of the completion of the government office centre. Full lease payments have been made to DAD SPV since July 2008. According to the construction progress report as of August 2010, the completion rate of the project was 99.1%, and approximately 85.7% of total rental spaces have been handed over to tenants. The transaction is also underpinned by the available liquidity reserve to alleviate any temporary shortfalls and the swap agreement to lower interest rate risk,” says Orawan Karoonkornsakul, Senior Director in Fitch Thailand’s Structured Finance team.
The lease payments paid by the TD come from a budget appropriation each year; thus the transaction is subject to the risk of a delay in the government’s budget appropriation process. According to DAD, if there is a delay in the budget appropriation process, each government unit would typically continue to pay their expenses using the previous year’s appropriated amount as a benchmark until the appropriation process is completed and the budget is allocated. In addition, funding of any unpaid lease payments by the TD is likely to come from DAD, which is obligated to advance the unpaid lease payments for the TD under its receivable sales agreement with DAD SPV. DAD has secured liquidity facilities with two banks to be specifically used for this purpose.
Contacts:
Lead Surveillance Analyst
Orawan Karoonkornsakul
Senior Director
+662 655 4766
Fitch Ratings (Thailand) Limited
Wave Place 13th floor, 55 Wireless Road
Bangkok 10330, Thailand
Committee Chairperson
Alison Ho
Senior Director
+852 2263 9937
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable
Additional information is available at www.fitchratings.com.
The source of information used to assess these ratings was DAD.
Applicable criteria available on Fitch's website at www.fitchratings.com: "Global Structured Finance Rating Criteria", dated 16 August 2010 and “Counterparty Criteria for Structured Finance Transactions” dated 22 October 2009.
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