MARC has affirmed the ratings of DHTI Capital Sdn Bhd’s (DHTI Capital) RM110.0 million Islamic Commercial Papers (ICP)/Islamic Medium Term Notes (IMTN) (Senior Notes) facility and RM10.0 million Junior IMTNs (Junior Notes) facility at MARC-1ID /AAID and A+ID respectively. The outlook on the ratings is negative.

The affirmed ratings are premised on the credit quality of the assigned lease rentals from the telecommunication operators, namely, Celcom Axiata Berhad, Maxis Berhad, and DiGi Telecommunications Sdn Bhd. The AA rating of the Senior Notes is weak-linked to MARC’s public information rating on the lowest rated telecommunication operator. The Junior Notes are two notches below the rating of the Senior Notes to reflect their subordination to the Senior Notes in respect of profit and principal payments.  The negative outlook reflects the company’s tight liquidity position and potentially insufficient time for cash accumulation to meet repayment should the company make additional drawdowns prior to the expiration of the Senior Notes facility in May 2015. Under the reduction schedule, the Senior Notes facility has an available limit of RM50.0 million until the expiry date.

DHTI Capital is a single purpose funding vehicle for its parent company, D’Harmoni Telco Infra Sdn Bhd (DHTI) which is involved in building, managing, maintaining and leasing telecommunication towers to telecommunication operators in Johor. The rental payments derived from 166 telecommunication towers under DHTI have been assigned to DHTI Capital to meet the profit and principal payments under the rated facilities. The payments are made into a trustee-controlled collection account from which 60% of the payments are directed to service the debt obligations and 40% to DHTI for maintenance costs of the telecommunication towers.

MARC notes that under the agreements with the telecommunications operators, rental rates decline by 25% from the eighth year onwards. As a result, DHTI Capital’s average monthly rental per tower has declined by 12.4% to RM10,324 per tower from the previous year in line with the increasing number of agreements exceeding the eighth year of leasing. DHTI Capital’s actual rental collections have been below projection for the last two financial years, with existing telecommunication towers generating about RM13.0 million of net operating cash flow against the financial obligation of RM11.0 million in the financial year ended December 31, 2013 (FY2013). Despite the continuous stress on DHTI Capital’s cash flows, net cash flow and cash balances together are expected to adequately cover the redemption of the Senior Notes outstanding.

The outstanding notes under the facilities are RM10.0 million Senior Notes and RM3.0 million Junior Notes; the facilities will expire in May 2015 and May 2016 respectively.

Contacts:
Nicola Tan, +603-2082 2262/ nicola@marc.com,my ;
Yap Lai Ken, +603-2082 2247/ laiken@marc.com.my.