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Fitch assigns Sime Darby’s first tranche of sukuk notes

Posted on January 23, 2013, Wednesday

KUCHING: Fitch Ratings (Fitch) has assigned Sime Darby Bhd’s (Sime Darby) first tranche of sukuk notes to be issued under its US$1.5 billion Sukuk programme an expected ‘A(EXP)’ rating.

According to a press release yesterday, Sime Darby’s ratings reflected its strong plantations business, its large size, a deversified business portfolio and its conservative financial leverage.

The global rating agency further added that the stable outlook reflected Fitch’s view of supportive industry fundamentals of Sime Darby’s plantation business, and the politically and economically stable markets in which it operated.

Fitch rated Sime Darby Long-Term Foreign and Local Currency Issuer Default (IDR) ‘A’, with stable outlook. It also had a Long-term foreign currency senior unsecured rating of ‘A’.

On January 15, 2013, Fitch rated the sukuk programme set up through a special purpose vehicle, Sime Darby Global Bhd, at the same level as Sime Darby’s senior unsecured rating in accordance with the agency’s ‘Rating Sukuk’ criteria.

“Sime Darby’s obligations to the sukuk programme rank equally with its senior unsecured debt obligations and the programme is exposed to low structural subordination risk on account of Sime Darby’s majority stake in and management control of key operating entities,” it stated.

The final ratings was contingent upon the receipt of the final documents conforming to information already received.

In addition, Fitch also pointed out the future developments that might, individually or collectively, lead to negative rating action, which included a downgrade in Malaysia’s country ceiling ‘A’ or an increase in the role of the Malaysian sovereign, or related entities in Sime Darby’s decision-making process.

A sustained increase in financial leverage to over 1.75 times would also lead to the ratings being downgraded.

Going forward, Fitch expected no positive rating in the medium term due to the cyclical nature of Sime Darby’s key businesses.

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