RAM Ratings reaffirms Dynasty Harmony’s AA3/Stable rating

Published on 17 Jan 2020.

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RAM Ratings has reaffirmed the AA3/stable rating of Dynasty Harmony Sdn Bhd’s (DHSB or the Company) RM165 mil (2018/2033) under the Company’s RM300 mil Islamic MTN Programme (the Sukuk). DHSB is a wholly owned funding vehicle of GFM Services Berhad (GFM). The Company relies solely on the residual cashflow of KP Mukah Development Sdn Bhd (KP Mukah) after the latter has met its obligations under a facility from Bank Pembangunan Malaysia Berhad (the Facility). KP Mukah holds the 23-year concession for the development and maintenance of a campus for Universiti Teknologi MARA (UiTM) in Mukah, Sarawak (the Project). The Facility had been drawn down to fund the construction of the Project.

The reaffirmation of the rating is premised on DHSB’s debt-servicing ability, which is anchored by KP Mukah’s residual cashflow that is to be channelled to the Company in the form of dividends on a quarterly basis, in accordance with a dividend schedule. RAM’s sensitised cashflow analysis indicates that KP Mukah will be able to adhere to the scheduled dividend payments, but may need to tap the Liquidity Reserve Account. That said, KP Mukah’s stressed finance service cover ratio (FSCR, with cash balances and calculated in payment months) is projected to remain steady at 1.58 times while DHSB’s stressed minimum subordinated finance service cover ratio (Sub-FSCR, with cash balances and calculated in payment months) is expected to stay at 1.38 times.

A tight financing structure and restrictive covenants imposed on KP Mukah, including no additional loans and the maintenance of a minimum FSCR of 1.50 times, minimise potential cashflow leakages. Every three months, the dividends from KP Mukah will be channelled directly to DHSB’s Revenue Account, which is solely operated by the Security Trustee. DHSB is prohibited from making any distribution to its shareholder or assuming any other loan.  KP Mukah’s Operating Account - opened under the Facility (which captures its residual cashflow after meeting its obligations under the Facility and any maintenance expense paid by UiTM in the event of non-performance by KP Mukah) - is managed by a custodian, i.e. Pacific Trustees Berhad. 

Notably, the sukukholders are subordinated to the senior lender (Bank Pembangunan) in this transaction due to the Sukuk’s lower priority in terms of cashflow waterfall and security. The sukukholders will only be entitled to profit payments in the first 10 years while principal repayment will commence in December 2028, after the full redemption of the Bank Pembangunan facility.

Meanwhile, the rating is also moderated by potential interest-rate volatility arising from the variable-rate feature of the facility. The timeliness of contractual payments from the Government is a key risk factor. The transaction is exposed to the risk of termination of the CA, which may result from KP Mukah’s failure to carry out the requisite maintenance services. While the risk of default by KP Mukah is low due to the low complexity of the Project, compensation from the Government will not cover the Sukuk as it will only address the loan taken to finance the construction of the Project.


Analytical contact
William Tan 
(603) 3385 2530

Media contact
Padthma Subbiah
(603) 3385 2577


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

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