Bangkok--8 Nov--Fitch Ratings
Fitch Ratings (Thailand) Limited has affirmed DAD SPV Company Limited’s (DAD SPV) CMBS notes at ‘AAA(tha)’ with Stable Outlooks. The CMBS is backed by 30-year lease and fee payments (lease payments) of the government office centre at Chaeng Wattana.
The rating actions are as listed below:
THB1.5bn DAD12NA (ISIN TH088803MB03) due November 2012 affirmed at ‘AAA(tha)’; Outlook Stable
THB2bn DAD15NA (ISIN TH088803PB00) due November 2015 affirmed at ‘AAA(tha)’; Outlook Stable
THB1.8bn DAD20NA (ISIN TH088803UB03) due November 2020 affirmed at ‘AAA(tha)’; Outlook Stable
THB5bn DAD25NA (ISIN TH0888035B07) due November 2025 affirmed at ‘AAA(tha)’; Outlook Stable
THB2.2bn DAD20NB (ISIN TH0888A3UB08) due November 2020 affirmed at ‘AAA(tha)’; Outlook Stable
THB6bn DAD25NB (ISIN TH0888A35B09) due November 2025 affirmed at ‘AAA(tha)’; Outlook Stable
THB5.5bn DAD25NC (ISIN TH0888B35B08) due November 2025 affirmed at ‘AAA(tha)’; Outlook Stable.
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 ratings reflect the long-term committed lease payments from the Treasury Department (TD) of the MoF, which is the sole obligor under the lease agreements with DAD. Based on expected annual lease payments, the transaction should be able 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%. A swap agreement - aimed at lowering interest rate risk - and available reserves are also supporting factors to the ratings.
“As the lease payments from TD form the majority of DAD SPV’s cash flows, the transaction is linked to the creditworthiness of the TD. Due to the lease payments’ unconditional and irrevocable structure, the payments commenced in July 2008 as specified under the lease agreements despite a delay in the construction. The project was fully completed in early 2011, later than the original schedule in 2008,” says Orawan Karoonkornsakul, Senior Director in Fitch Thailand’s Structured Finance team.
“The committed payments also help protect the transaction from any adverse impact that may arise from the existing major flooding in Bangkok,” adds Ms Karoonkornsakul.
The lease payments paid by 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, should there be 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. This was the case for the lease payments in October this year, which was based on the amount paid in the previous year. In addition, funding of any unpaid lease payments by TD is likely to come from DAD, which is obligated to advance any unpaid lease payments for TD. At present, DAD has an outstanding THB2.3bn unsecured liquidity facility from a state-owned bank for this purpose.