Friday, Jan 13, 2006
This proposed Murabahah Medium-term Notes (“MMTN”) programme represents a structured transaction involving the assignment of license/ rental payments due from the local telecommunication companies (“telcos”) to the Issuer, Instacom SPV Sdn Bhd (“Instacom SPV”); in respect of the erection of telecommunication towers (“towers”) and construction of related infrastructure. Accordingly, MARC has assigned a long-term rating of AA-ID to Instacom SPV’s MMTN with a nominal amount of up to RM200.0 million. The proceeds of the MMTN would be mainly utilised for construction of towers.
The rating assigned reflects the stringent issue structure which mitigates construction risk in relation to the building of telecommunication infrastructure and strong credit profile of the off-takers’ namely the telcos. Specifically, the drawdowns of the MMTNs are subject to completion of construction works. In addition, MARC also takes into consideration the commendable cash flow position of the Issuer, going forward, aided by manageable construction costs against the stable and recurring cash rental inflows from the telcos.
Instacom SPV is a single-purpose entity wholly owned by Instacom Engineering Sdn Bhd (“Instacom Engineering”); facilitating the issuance of the MMTNs. Instacom Engineering specializes in the erection of telecommunication towers, related civil works for tower sites, construction of telecommunication cabins and other related works. Instacom Engineering would undertake the construction works, hence, mitigating construction risk.
Under the issue structure, initial and subsequent issuances/ drawdowns of the MMTNs are subject to the completion of the towers and other communication facilities. Noteholders are, thus, not exposed to construction risk under this programme. The telcos emerge as the major off-takers under this programme. Credit standings of the off-takers are of superior quality.
Liquidity risk is mitigated by the priority ranking accorded to payment obligations under the MMTNs in the payment waterfall. Refinancing risk is moderated by the serial nature of the facility. Furthermore, the requirement to maintain at all times minimum cash balances equivalent to the next three months’ principal and coupon act as liquidity buffer to cover any shortfall in operating cashflows.
During the tenure of the proposed MMTNs, Instacom SPV’s cash flow position is anticipated to be strong; offering adequate protection to the noteholders. From MARC’s sensitivity analysis, the Issuer’s cash flow was found to be somewhat resilient to increase in construction cost.
The rating assigned reflects the stringent issue structure which mitigates construction risk in relation to the building of telecommunication infrastructure and strong credit profile of the off-takers’ namely the telcos. Specifically, the drawdowns of the MMTNs are subject to completion of construction works. In addition, MARC also takes into consideration the commendable cash flow position of the Issuer, going forward, aided by manageable construction costs against the stable and recurring cash rental inflows from the telcos.
Instacom SPV is a single-purpose entity wholly owned by Instacom Engineering Sdn Bhd (“Instacom Engineering”); facilitating the issuance of the MMTNs. Instacom Engineering specializes in the erection of telecommunication towers, related civil works for tower sites, construction of telecommunication cabins and other related works. Instacom Engineering would undertake the construction works, hence, mitigating construction risk.
Under the issue structure, initial and subsequent issuances/ drawdowns of the MMTNs are subject to the completion of the towers and other communication facilities. Noteholders are, thus, not exposed to construction risk under this programme. The telcos emerge as the major off-takers under this programme. Credit standings of the off-takers are of superior quality.
Liquidity risk is mitigated by the priority ranking accorded to payment obligations under the MMTNs in the payment waterfall. Refinancing risk is moderated by the serial nature of the facility. Furthermore, the requirement to maintain at all times minimum cash balances equivalent to the next three months’ principal and coupon act as liquidity buffer to cover any shortfall in operating cashflows.
During the tenure of the proposed MMTNs, Instacom SPV’s cash flow position is anticipated to be strong; offering adequate protection to the noteholders. From MARC’s sensitivity analysis, the Issuer’s cash flow was found to be somewhat resilient to increase in construction cost.