MARC has assigned the ratings of MARC-1_ID/AA_ID to Tele-Flow Capital Sdn. Bhd.’s (Tele-flow Capital) RM90 million Senior Notes under the MUNIF/IMTN Facility.  The ratings reflect the exclusive rights to construct and manage the telecommunication towers and structures in the State of Kedah; the licensing agreement entered into with creditworthy telecommunication companies/ operators (telcos); protective issue structure with drawdown of MUNIF/ IMTN subject to completion of construction of towers and strong cash flow protection during the tenure of the Facility. The RM10 million Junior notes under the IMTN facility is a non-rated piece.

Tele-flow Capital (formerly known as Tele-Flow (Perak) Sdn. Bhd), is a wholly owned subsidiary of Tele-flow Corporation Sdn. Bhd (TCSB) incorporated solely for the purpose of issuing the MUNIF/IMTN Facility; funding the construction of telecommunication towers or infrastructures (towers) undertaken by TCSB, the latter being the management company of Yiked Bina Sdn Bhd (YBSB); and collecting periodic lease payments from telcos as consideration for use of the towers on a sharing basis.  TCSB assumed the role of management company for YBSB vide a Management Agreement signed in September 2005.  TCSB is principally involved in planning, construction and maintenance of towers as well as running day to day operations of YBSB.  YBSB is the only state-backed company which has been entrusted to build, manage, lease and maintain towers in the State of Kedah.  YBSB entered into a License Agreement with Celcom (Malaysia) Bhd (Celcom), Maxis Broadband Sdn Bhd (Maxis) and Digi Telecommunications Sdn Bhd (Digi) in April 2005 covering a period of ten years stipulating, amongst others, YBSB’s responsibilities and obligations which include serving appropriate sites, commissioning the construction of towers and granting telcos the right to use the towers on a sharing basis.

Under the transaction, the drawdown of the MUNIF/IMTN will be carried out only upon completion of construction works of towers by TCSB, thus eliminating construction risk.  The lease rental payments from telcos (Maxis, Celcom and Digi), which form the source of principal and profit repayments for the MUNIF/IMTN, will be assigned from TCSB to Tele-flow Capital, mitigating the risk of payments from telcos commingling with other funds of TCSB. In addition, the transaction structure requires approximately 60% of the monies from the collection account to be paid into the sinking fund account specifically earmarked for payments of principal and profits under the MUNIF/IMTN.
Maintenance risk is considered minimal as the towers require minimal maintenance work with replacement of antennas or other equipments being the responsibility of the telcos.

The profit projection during the tenure of the facility is commendable with net profit margin averaging 25.2%.  The forecasted cashflow is reasonably strong exhibiting ability to withstand the delay in rental receipts and cost overruns with average and minimum debt service cover ratio at 2.73 times and 1.76 times respectively.