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 a long-term swap agreement aimed at reducing interest rate risk and available reserves. The first payment of the bonds will be 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 2011, which were based on the amount paid in 2010, while there was no delay in the budget appropriation for 2012. Since the commencement of payments in July 2008, DAD SPV has received all lease payments as scheduled.
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 shortfall via loans from Krung Thai Bank.
DAD SPV:
THB1.5bn DAD12NA (ISIN TH088803MB03) affirmed at 'AAAsf(tha)'; Outlook Stable
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