MARC has assigned an ‘AID’ rating to Tele-Flow Capital Sdn Bhd’s (Tele-Flow Capital) up to RM10.0 million Junior Islamic Medium Term Notes (Junior IMTN) issued under its RM100.0 million MUNIF/IMTN Facility (Facility). MARC had earlier announced the affirmation of the ratings on Tele-Flow Capital’s RM90.0 million Senior MUNIF/IMTN (Senior Notes) at MARC-1ID /AAID on August 10, 2007. The Junior IMTN were previously unrated.

The rating of the Junior IMTN reflects its subordination to the Senior Notes in respect of profit payment and principal repayment. The ratings of the Senior Notes reflect the credit quality of a rental payment stream from creditworthy telecommunication companies (telcos) that is assessed to be MARC-1ID/AAID. The payment stream is backed by a license agreement that obligates the telcos to make monthly payments of agreed rent over a period of 10 years. Also factored in the ratings are structural features which ensure ring-fencing of rental payments from the telcos for the benefit of noteholders, the elimination of the noteholders’ exposure to construction risk, and Tele-Flow Capital’s relationship with Yiked Bina Sdn Bhd (YBSB) through its parent, Tele-Flow Corporation Sdn. Bhd’s (TCSB) 49% interest in YBSB. YBSB is the state backed company appointed to construct and manage the telecommunication towers and structures in the state of Kedah.

The forecasted cash flow for the Junior IMTN exhibits moderate sensitivity to delays in rental payments, changes in variation orders and the number of telcos sharing the towers.  The minimum FSCR is expected to be at least 1.0 time under the various stress scenarios while base case FSCR averages at 2.53 times. All drawdowns under the Facility are projected to conclude within the first 3 years, thus allowing sufficient time for the accumulation of rental payments to meet the redemption of the notes at maturity. Presently, RM5.0 million of the Junior IMTN are outstanding under the Facility.