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July 14 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings (Thailand) Limited has affirmed DAD SPV Company Limited's (DAD SPV) bonds at 'AAAsf(tha)' with a Stable Outlook.
This transaction is a CMBS backed by a 30-year lease and fee payments from the government office centre in North Bangkok, which is developed and managed by the Ministry of Finance's (MoF) wholly owned asset development company - Dhanarak Asset Development Company Limited (DAD). A full rating breakdown is provided at the end of this commentary.
The ratings reflect irrevocable and unconditional lease payments from the Treasury Department (TD) of the MoF, which is the sole obligor under the lease agreements with DAD. As DAD SPV's cash flows are predominantly derived from the lease payments, the transaction is linked to the creditworthiness of the TD. The lease payments from the TD are paid directly to DAD SPV, mitigating commingling risk. Based on scheduled annual lease payments, Fitch expects that the transaction will be able to maintain a debt service coverage ratio of at least 1.0x and withstand a refinancing rate higher than the agency's assumption of 15%.
The ratings are also underpinned by available reserves and a long-term swap agreement aimed at reducing interest rate risks. The first payment of the bonds was made in late November 2012.
The lease payments paid by the TD come from a budget appropriation each year; thus the transaction is subject to the risk of a delay in the government's budget appropriation process. General practice for government units is to use the previous year's appropriated amount as a benchmark until the appropriation process is completed and the budget is allocated. This was the case for the lease payments in October 2013, which were based on the amount paid in 2012. Since the commencement of payments in July 2008, DAD SPV has received all lease payments as scheduled. For this year, DAD expects the lease payments to be made in a timely manner in October 2014, consistent with payments in prior years. Funding of any unpaid lease payments due from the TD is likely to come from DAD, which is obligated to advance any unpaid lease payments for the TD. At present, DAD has an outstanding THB2.3bn unsecured liquidity facility from Krung Thai Bank (AA+(tha)/Stable/F1+(tha)) for this purpose. While DAD's operating performance and financial position has been weak, Fitch considers state support would be forthcoming if needed, given its state enterprise status. DAD has been funding its cash shortfalls via loans from Krung Thai Bank.
The ratings are based to the creditworthiness of TD which is a unit of MoF. Due to the irrevocable and unconditional pre-determined lease payments from the TD, Fitch considers a downgrade due to asset performance unlikely.
THB2bn DAD15NA (ISIN TH088803PB00) affirmed at 'AAAsf(tha)'; Outlook Stable
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THB5bn DAD25NA (ISIN TH0888035B07) affirmed at 'AAAsf(tha)'; Outlook Stable
THB2.2bn DAD20NB (ISIN TH0888A3UB08) affirmed at 'AAAsf(tha)'; Outlook Stable
THB6bn DAD25NB (ISIN TH0888A35B09) affirmed at 'AAAsf(tha)'; Outlook Stable
THB5.5bn DAD25NC (ISIN TH0888B35B08) affirmed at 'AAAsf(tha)'; Outlook Stable