TRIS Rating Affirms "AAA" Ratings for Debentures of “DAD SPV”

TRIS Rating Co., Ltd. has affirmed the “AAA” ratings for the debentures of DAD SPV Co., Ltd. (SPV or Issuer). The ratings reflect the creditworthiness of the Treasury Department (TD or Tenant), which is a department of the Thai government, as the sole tenant of the Bangkok Metropolitan Government Office Center (the Government Office Center). The ratings also reflect the certainty of the cash flow streams from the lease and service payments made by the TD and the sufficiency of the cash flows from the TD and Dhanarak Asset Development Co., Ltd. (DAD or Originator), a state enterprise wholly owned by the Ministry of Finance (MOF), to fulfill all obligations in a timely manner.

TRIS Rating reported that the debentures of SPV are issued under the Bt24,000 million securitization program of SPV. SPV is a limited liability company established under the laws of Thailand and was granted special purpose vehicle status by the Securities and Exchange Commission (SEC). The Issuer is 49% owned by DAD. Approximately Bt20,430 million of the proceeds from the debenture issuance and Bt19,570 million of the subordinated promissory notes (sub P/N) issued by SPV to DAD have been used to purchase the rights to receive lease and service payments from the TD under a 30-year Building Space Lease Agreement, a 30-year Service Agreement, and a 5-year Furniture Procurement Agreement, collectively referred to as the “Underlying Agreements,” as the TD has contracted with DAD. The sub P/Ns are ranked lower than the rated debentures and serve as a credit enhancement for the debenture holders. The proceeds from this securitization program are used by DAD to fund the construction of the Government Office Center on Chaeng Wattana road, which has been leased to the TD for 30 years, starting in 2008. The Tenant is not allowed to terminate the lease as long as the debentures issued under this securitization program, or any new debentures issued to replace the existing debentures, have not been fully redeemed. In addition, DAD has pledged, under the assignment of assets agreement between DAD and SPV, to cover any possible future shortfalls or delayed payments by the TD.

TRIS Rating said the construction of the Government Office Center was 99.17% complete during the end of September 2010. DAD expects to complete the overall construction in 2010, extended from the original target of August 2008. Most of the government office units have moved in, accounting for 419,675 square meters (sq.m.) or 86.7% of the total rental space. Although the construction is not completed as planned, the TD is still obliged to pay in advance the 12-month lease payments to SPV, starting from the beginning of July 2008. In September 2008, the debenture holders approved the change of the lease and service payments schedule from the first of July to within October of each year. The change resolved a timing mismatch between the 12-month advance lease payment period (July-June) and the government fiscal year (October-September). In October 2010, the TD made the 12-month lease and service payments required by the underlying agreements as scheduled. After receiving the lease and service payments, the transaction administrator has allocated the money to the reserve accounts accordingly. -- End

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