Bangkok--Nov 11--Fitch Ratings (Thailand)
Fitch Ratings (Thailand) Limited today held an investor workshop on the Thai Ministry of Finance’s Treasury Department securitisation of its new government office centre.
The workshop examined Fitch's rating methodology for commercial mortgaged backed securitisations (“CMBS”) of office buildings, looking at the Treasury Department office centre securitisation as a case study. Keynote speakers were Ms. Pimolpa Simaroj, Director of Structured Finance at Fitch, and Mr. Somyod Suteerapornchai, Senior Associate of Hunton & Williams (Thailand).
In opening the seminar Mr. Vincent Milton, Managing Director of Fitch’s Bangkok office, noted the importance of the Treasury Department’s securitisation programme, which he said was initiated to develop a broader market for securitisation in Thailand. “This is a pioneering transaction for CMBS in Thailand and should set a good benchmark for future securitisation transactions and broaden the investor base. The Thai government is also looking to partially fund other infrastructure projects through the capital markets,” said Mr. Milton. The deal is the largest transaction the market has seen over the past five years and the first initiated by the Thai government.
Ms. Simaroj highlighted key credit issues of the transaction and their mitigants. She noted that the Treasury Department will enter into the agreements to lease the office and pay for the leases on behalf of 28 state agencies. Dhanarak Asset Development, which is wholly-owned by the Ministry of Finance, is responsible for the construction and the management of the properties. It will fund the construction cost by issuing bonds using 30-year lease payments from the Treasury Department to back the bonds. “We view the Treasury Department, which is a department of the Ministry of Finance, as sovereign risk. The obligation to pay is unconditional and irrevocable over the life of the transaction which makes the cashflow of the deal very stable. This is why the transaction is highly rated,” commented Ms. Simaroj.
A brief of the legal issues from an investor’s perspective was also provided by Mr. Suteerapornchai. “The payment arrangement with the Treasury Department is strong. Under the lease agreements, the payment shall be made in all events, regardless of whether the completion of the construction or the buildings is not utilisable. The agreements cannot be terminated as long as there are outstanding bonds. This will ensure that SPV will have direct claims to the Treasury Department if it stops paying.”
Contact: Pimolpa Simaroj, Vincent Milton; Bangkok, Tel: +662 655 4755.
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