TRIS Rating has viewed that Don Muang Tollway PLC (DMT) will be able to service, in full, its existing debt obligations, taking into account the ruling of the Central Administrative Court on 18 August 2015. The Court revoked the Cabinet resolutions, made on 11 April 2006 and 10 April 2007, which approved an amendment to DMT's concession.
Following the Cabinet resolutions in 2006 and 2007, the concession agreement between the Department of Highways (DOH) and DMT was amended, as described in the Memorandum of Agreement Amending the Concession Agreement No. 3/2007, dated 12 September 2007 (MOA3). In brief, the MOA3 allowed DMT to adjust the toll fee, which had been reduced during 1999-2007, to the level previously agreed upon and extended the concession period from 2021 to 2034.
DMT and other defendants are expected to appeal to the Supreme Administrative Court. An appeal of the recent decision by the Central Administrative Court shall be made within 30 days of the judgment (17 September 2015). TRIS Rating will closely monitor the progress of the appeal and the final result.
TRIS Rating has reassessed the credit quality of DMT based on a scenario in which the MOA3 was not signed and the existing concession ends in 2021. At the end of June 2015, DMT had outstanding debts of Bt5,975 million in total. The maturities of the debts span from 2015 to 2020. Based on the current structure of the toll fees, DMT’s projected operating cash flow generated during 2015-2021 will be sufficient to service its debt obligations and support its needed capital expenditures. In addition, DMT's management team has committed to putting the creditors as its first priority. The Board of Directors had resolved to revoke the resolution to pay interim dividend of Bt490 million on 12 September 2015. The company recently secured a Bt1,900 million credit facility from a financial institution to bridge any short-term funding gap that may arise in case that debenture issuance could not be fulfilled.
Going forward, DMT's management team has clearly stated that the company will pay down its outstanding debts when the debts come due. DMT may need to refinance some existing debts, possibly in 2017, which the company will have a free cash flow available in 2018 and 2019. Hence, all of DMT’s outstanding debts should be fully repaid before 2021. TRIS Rating expects DMT to prepare in advance a refinancing plan and reserve the sufficient liquidity at all times.
TRIS Rating takes no action on DMT's company rating and issue ratings based on the company's plans to meet its liquidity needs, plus the management team’s decision to suspend the dividend payment, and the fact that the debt service coverage ratio remains greater than 1 times in case the concession ends in 2021. The ratings, however, could be revised if there are any significant adverse changes in legal outcomes or DMT’s financial profile.
DMT is currently assigned the company rating and senior unsecured debenture ratings at "A-", with a "stable" outlook by TRIS Rating.
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