(Repeat for additional subscribers)
July 14 (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
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.
KEY RATING DRIVERS
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
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
THB1.8bn DAD20NA (ISIN TH088803UB03) affirmed at 'AAAsf(tha)'; Outlook Stable
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