Bangkok--10 Oct--Fitch’s rating
Fitch Ratings-Bangkok/Hong Kong/Singapore- 10 October 2006: Fitch Ratings (Thailand) Limited today assigned final National ratings of ‘AAA(tha)’ to DAD SPV Company Limited’s (“DAD SPV”) new THB2.2 billion Series 1 (due 2020) and THB6.0bn Series 2 (due 2025) bonds to be issued this month. At the same time, Fitch also affirmed the ‘AAA(tha)’ ratings of four series of DAD SPV’s outstanding bonds totaling THB10.3bn, which were issued in 2005. The securitisation programme permits bond issuance of up to THB24.0bn within three years. The ability to issue additional bonds will largely depend on the domestic interest rates to ensure cash flows are sufficient to meet payments on the outstanding bonds. Subsequent issues will only be allowed if the issues do not negatively affect the ratings on the outstanding bonds.
The transaction is the first securitisation programme initiated by the Thai Government and is backed by the 30-year lease and fee payments to be received from the new 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 responsible for developing the project. The transaction was closed in November 2005, with DAD SPV purchasing the rights to receive cash flows from DAD under three contracts, namely the building space lease, services and furniture procurement agreements. The purchase price was THB40bn, which was partly funded by the net proceeds of THB7.8bn after deducting reserves and expenses of the first bond issuance in 2005; the remainder (THB32.2bn), was funded by the issuance of subordinated promissory note to DAD, which will be partly repaid by the issuance of the new bonds this year and in 2007. This subordinated promissory note ranks after bondholders in the cash waterfall structure, effectively serving as the credit enhancement.
The ratings reflect available committed stable cash flows from the sole underlying obligor, the Treasury Department (“TD”) of MoF, and the full upfront reserves to meet interest and expenses payable during the construction period as well as principal accumulation reserve. The ratings address the timely payment of note interest and ultimate repayment of principal by final maturity.
The potential refinancing risk of bonds due in 2025 (Series 4 bonds issued in 2005 and Series 2 bonds to be issued this month) is partly mitigated by a principal accumulation reserve, which should help reduce the amount of bonds to be refinanced in 2025. This, together with the remaining cash flow from year 2025 onwards, should result in a positive debt service coverage up to Fitch’s refinance rate assumption of 15% which is based on the historical government reference yield for a ‘AAA(tha)’ stress scenario.
DAD SPV, a special-purpose company with limited liability established under Thai law, was granted special-purpose vehicle status under the Securitisation Law from the Securities and Exchange Commission (“SEC”).
A copy of the full new issue report will be available on the agency’s web site, www.fitchratings.com . and Fitch’s Asian website www.fitchratingsasia.com
Contacts: Orawan Karoonkornsakul, Napachak Phasukavanich, Vincent Milton; Bangkok, Tel: +662 655 4755; Stan Ho, Hong Kong, +852 2263 9963
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with sub- or low-investment grade international sovereign 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.
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