RAM Ratings affirms Dynasty Harmony's AA3/Stable issue ratings

RAM Ratings has affirmed the AA3/Stable ratings of the RM165 mil Islamic Medium-Term Notes (IMTN) (2018/2033) and RM55 mil Islamic Medium-Term Notes (2025/2036) under Dynasty Harmony Sdn Bhd's (Dynasty Harmony) RM300 mil Sukuk Programme (2018/2036) (the Sukuk).

Dynasty Harmony is a wholly owned funding vehicle of GFM Services Berhad (GFM Services) and sister company of KP Mukah Development Sdn Bhd (KP Mukah) - the concession holder that built and maintains the Universiti Teknologi MARA campus in Mukah, Sarawak, for which it enjoys predictable concession cash flows. To service dues under the Sukuk, Dynasty Harmony is entirely dependent on dividend distributions from KP Mukah after the latter meets its own operational and financial obligations.

The rating affirmations are premised on the transaction's stable cash flow, adequate liquidity and healthy finance indicators, as measured by the subordinated finance service coverage ratios (sub-FSCRs) and finance service coverage ratios (FSCRs). The ratings are notched down to reflect Dynasty Harmony's subordinated position to KP Mukah's senior debt lender, which ranks ahead in payment priority and security position; principal repayment on Dynasty Harmony's obligations commences only after the full redemption of KP Mukah's debt obligations.

Timely concession payments and commendable campus maintenance - undertaken by Global Facilities Management Sdn Bhd, another sister company - during the review period allowed KP Mukah to pay dividends to Dynasty Harmony as scheduled. Cash retention measures imposed under the transaction, such as limits on shareholder distributions and spending, reduce the risk of cashflow leakages, further preserve the Company's excellent credit profile and debt coverage.

Even under RAM's stressed assumptions - such as delayed payments, nonperformance deductions, increased maintenance costs, reduced investment income and KP Mukah'