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MARC upgrades tele-flow capital's MYR 10 million junior IMTN facility rating.

MARC has upgraded its rating on Tele-Flow Capital Sdn Bhd's (Tele-Flow Capital) MYR 10.0 million Junior Islamic Medium Term Notes (IMTN) Facility (Junior Notes) to ID from -ID; the rating outlook is stable.

"The rating action affects the MYR 5 million outstanding Junior Notes as at end-September 2013," it said. "The rating upgrade follows the elimination of the structural subordination of the Junior Notes to the Senior Notes which was fully redeemed on April 19, 2013. The Senior Notes issued under the MYR 90.0 million Murabahah Underwritten Notes Issuance/IMTN Facility were rated one notch higher than the Junior Notes at ID.

"Tele-Flow Capital is a wholly-owned subsidiary of Tele-Flow Corporation Sdn Bhd (TCSB) and was solely established for the purpose of issuing the IMTNs, the proceeds of which were mainly used to finance the acquisition and construction of telecommunication (telco) towers undertaken by TCSB in Kedah. Rental payments from the telco companies, Maxis Berhad, Celcom Axiata Berhad and DiGi Telecommunications Sdn Bhd, are assigned from TCSB to Tele-Flow Capital to meet the profit and principal payment under the rated facility. The rating reflects the credit quality of the assigned rental payments from creditworthy telcos and is weak-linked to MARC's /stable public information rating on the lowest rated telco.

"MARC observes that the number of towers under TCSB has remained at 136 since 2010 as there has been no new construction or acquisition of towers under the rated facility. MARC notes that liquidity risk has been eliminated with the maintenance of a fully funded designated account in which the outstanding balance of RM5.2 million as at end-September 2013 is sufficient to meet the final redemption of RM5 million in May 2014. Tele-Flow Capital maintained comfortable covenant headroom with respect to its finance service cover ratio (FSCR) which stood at 25.86 times (x) as at March 31, 2012, well above its minimum covenant of 1.5x."

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Publication:CPI Financial
Date:Nov 16, 2013
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