[RAM] RAM Ratings assigns AA3 rating to Dynasty Harmony's subsequent RM60 mil IMTN

RAM Ratings has assigned an AA₃/Stable preliminary rating to Dynasty Harmony Sdn Bhd’s (Dynasty Harmony or the Company) proposed issuance of an additional RM60 mil of Islamic Medium-Term Notes (IMTN) under its RM300 mil IMTN Programme (the Sukuk). The existing RM165 mil tranche is rated AA₃/Stable and was last affirmed on 4 October 2024 – click here for details). Ratings for both issues rank pari passu, with principal repayments for the RM60 mil IMTN commencing after the redemption of the existing IMTN. 

Dynasty Harmony is a wholly owned funding vehicle of GFM Services Berhad (GFM Services) and a sister company of KP Mukah Development Sdn Bhd (KP Mukah). As the concession holder, the latter built and maintains Universiti Teknologi MARA campus in Mukah, Sarawak. To service dues under the Sukuk, Dynasty Harmony is entirely dependent on cashflows via dividend distributions or ordinary shares subscriptions from KP Mukah after the latter meets its own operational and financial obligations. The AA₃ ratings are based on strong operating performance and stable, predictable concession payments from KP Mukah. These factors are crucial to maintaining the Company’s excellent credit profile and debt coverage – as measured by the subordinated finance service coverage ratio (sub-FSCR) – under the proposed and existing sukuk issuances. The ratings are also notched down to reflect its subordinated position from KP Mukah’s senior debt lender, who ranks ahead in terms of payment priority and security position. 

The additional proposed RM60 mil IMTN will increase aggregate financing for KP Mukah and Dynasty Harmony’s financing obligations, with the Sukuk’s repayment tenure extended to December 2035. Issuance proceeds will be used by GFM Services for investments and working capital, with a portion retained for liquidity and issuance expenses.

Under RAM’s stressed analysis, factoring in the sensitivities of delayed payments, deductions for non-performance, lower investment income and higher financing expenses for KP Mukah’s debt obligations, our cashflow analysis projects Dynasty Harmony’s minimum sub-FSCRs at 1.7 times, significantly higher than RAM’s AA₃-threshold required for a low-complexity Private-Finance-Initiative/Public-Private-Partnership project. The Sukuk’s ratings may be upgraded after KP Mukah’s senior debt is redeemed in April 2028, depending on KP Mukah and Dynasty Harmony maintaining an FSCR above 1.35 times. Tight cash retention features including restrictions on shareholder distributions and excessive expenditures ensure that any cash flow outperformance will boost the Company’s financial risk profile on a continuing basis.

The transaction is exposed to termination risk as any compensation for concession termination at KP Mukah is not linked to the holders of the Sukuk. In the unlikely event of a default by KP Mukah, compensation from the government will only address the repayment of a financing facility under KP Mukah. Holders of the Sukuk may pursue recovery, though limited, via advances extended to GFM Services.


Analytical contacts
Liew Kar Ling    
(603) 3385 2586
karling@ram.com.my

Davinder Kaur Gill
(603) 3385 2525
davinder@ram.com.my

Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my