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Sime Darby sets benchmarks

KUALA LUMPUR: SIME Darby Bhd, which saw a strong demand for its first US dollar-denominated islamic bond, has priced the US$800 million (RM2.43 billion) two-tranche sukuk at record low yields, setting new benchmarks.

The sukuk was oversubscribed by more than 10 times, with orders amounting to more than US$8 billion, said the country’s largest conglomerate.

It priced its inaugural US$400 million five-year sukuk issue at 2.053 per cent a year, and its US$400 million 10-year issue at 3.29 per cent a year.

It achieved the lowest ever coupon rate by any corporate issuer globally in the US dollar sukuk market, reflecting the strong demand for both offerings.

The transaction was closely watched as Sime Darby is the first Malaysian issuer and the first sukuk issuer globally in 2013 to tap the international US dollar debt capital markets.

The issues, which are part of a US$1.5 billion multi-currency sukuk programme that Sime Darby established earlier this month, will be listed in both Malaysia and Singapore.

“I think demand for the issues will remain strong. It’s a rare sector as most issuances are in the banking sector. Plus, demand always outstrips supply in the sukuk space,” a chief investment officer who helps manage fixed income funds told Business Times.

The sukuk programme was accorded an “A” rating by both Fitch Ratings and Standard & Poor’s Ratings Services, and “A3” by Moody’s Investors Services.

Sime Darby, which is among the top three largest plantation firms in the world, plans to use the net proceeds from the issues to finance the group’s capital expenditure, working capital requirements and general corporate purposes.

By geography, the five-year issue attracted 184 orders across Asia (83 per cent) and the Middle East/Europe, while the 10-year issue attracted 192 orders across Asia (57 per cent) and Middle East/Europe.

“We are extremely pleased with our debut issuance and the robust investor response we have received. 

“The confidence the market has placed in us is clear testament to the strength of the group, especially in the longer term,” said its president and group chief executive officer Datuk Mohd Bakke Salleh in a press release yesterday.

He said the transaction also represented the lowest ever US dollar coupon in sukuk format by an Asian issuer, and the lowest ever by a Malaysian borrower in the US dollar market, in both the five-year and 10-year tenures.

Citi, HSBC, Maybank and Standard Chartered were the banks involved in the transactions.

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