Kuala Lumpur: Proposed Sukuk issuance program of $1.5 billion by Sime Darby Bhd. in Malaysia has been assigned “A” rating on Tuesday by a well-known rating agency, Fitch Ratings.
The rating agency said that the proposed Sukuk program – set up through its special purpose vehicle – Sime Darby Global Bhd., was rated at the same level as Sime Darby’s senior unsecured rating in accordance with Fitch’s “Rating Sukuk” criteria.
It stated, “Sime Darby’s obligations relating to the Sukuk program rank equally with its senior unsecured debt obligations and the program is exposed to low structural subordination risk on account of Sime Darby’s majority stake in and management control of key operating entities.”
Fitch said that the program would be a sale and lease back transaction involving Sime Darby as the seller of Sukuk assets and lessee and Sime Darby Global Bhd. as the purchaser of Sukuk assets and lessor.
The return on the Sukuk assets would be from lease rentals paid by Sime Darby in relation to the Sukuk assets.
Fitch also informed that the debt repayment would be backed by a purchase undertaking clause. Sime Darby would repurchase the assets at an exercise price essentially equivalent to the nominal amount of the debt and any interest outstanding.
Sime Darby would use the proceeds of the Sukuk program for Shariah-compliant capital expenditure, investment, working capital and other general corporate purposes.
Last Friday, Fitch assigned Sime Darby “A” long-term foreign and local currency issuer default ratings (IDRs), with stable outlook.
It also said that the long-term foreign currency senior unsecured rating was also assigned an “A”.
Sime Darby’s ratings reflected its strong plantations business, its large size, a diversified business portfolio and its conservative financial leverage.
The stable outlook reflected Fitch’s view of the supportive industry fundamentals of Sime Darby’s plantation business, and the politically and economically stable markets in which it operates.