AA3/stable rating for GFM’s RM165mil sukuk

KUALA LUMPUR: GFM Services Bhd’s proposed RM165mil sukuk tranche, to be issued by wholly-owned funding vehicle Dynasty Harmony Sdn Bhd (DHSB), has received a preliminary AA3/stable rating from RAM Rating Services Bhd.

The 10 to 14½-year sukuk is part of a RM300mil Islamic medium-term note programme.

In a statement, the rating agency said the rating reflected DHSB’s strong debt coverage, underpinned by the stable and predictable residual concession cashflow of KP Mukah Development Sdn Bhd.

KP Mukah holds a concession to provide asset management services for Universiti Teknologi Mara (UiTM) Mukah campus in Sarawak until September 2035.

RAM Rating said GFM, which acquired the entire stake in KP Mukah on Nov 27, 2018, is a leading local provider of integrated facilities management and consultancy services, with an 18-year track record.

It noted that since construction of the facilities and infrastructure were completed in October 2015, KP Mukah had been receiving fixed and prompt monthly availability charges from a strong counterparty – the government – through UiTM.

“Based on cashflow analysis, DHSB is projected to register a minimum subordinated finance service cover ratio (with cash balances and calculated in payment months) of 1.38 times throughout the tenure of the proposed sukuk,” the rating agency said.

It pointed out that sukuk holders would only be entitled to profit payments in the first 10 years while principal repayment would start in October 2028, after the full redemption of the facility.

RAM Rating said the preliminary rating was also moderated by potential interest-rate volatility arising from the variable-rate feature of the facility, and the highly leveraged capital structure.

It also said the timeliness of contractual payments from the government is a key risk factor. — Bernama