Boustead to issue up to RM1.2b in perpetual sukuk

KUALA LUMPUR: Boustead Holdings Bhd will issue a junior Islamic medium term note programme of up to RM1.2 billion in nominal value with no pre-determined maturity following its approval by Securities Commission Malaysia (SC) on Nov 15.

The company will use the proceeds from the perpetual junior sukuk programme to refinance existing borrowings and to finance capital expenditure, working capital requirements, corporate exercises, repayment of inter-company borrowings and the general investments of the group and its subsidiaries.

“The junior sukuk programme is timely since it allows the group to raise the required funds as and when the appropriate opportunities present themselves,” said group managing director Tan Sri Lodin Wok Kamaruddin.

According to the group finance director Daniel Ebinesan, the perpetual junior sukuk incorporates the characteristics of equity and would be recognised as part of its shareholders’ funds.

“Coupled with the proceeds from the proposed IPO of Boustead Plantations Bhd (BPB) [in 2014], the junior sukuk programme would lead to the improvement of the group’s gearing level,” Ebinesan said.

He added that the first tranche of the programme will be issued by the end of the year to raise RM683 million, and be subscribed by a few institutional investors. Further perpetual junior sukuk could be issued under the programme. The sukuk will be callable after five years and will not have any collateral. It will not be rated as well.

The group will use RM650 million of the total proceeds for the privatisation of Al-Hadharah Boustead REIT. Boustead REIT’s unitholders and Boustead’s shareholders had on Dec 5 approved the privatisation of Boustead REIT, to be assumed under Boustead’s wholly-owned subsidiary BPB.

“The privatisation of Boustead REIT is part of the group’s plan to consolidate and further unlock the value of its plantation businesses,” said Lodin. “The consolidation of our plantation assets under BPB is to achieve economies of scale and business synergies in its operations. Subsequently, we are looking to further unlock the value of our plantation business via the planned listing of the enlarged BPB in 2014.”

The world’s first corporate perpetual sukuk was issued by Malaysian Airline System Bhd in June 2012, raising RM2.5 billion. Since then, four companies including Boustead have followed suit with their own programmes. Paramount Corp Bhd raised RM200 million in February through perpetual bonds, while Malaysia Airports Holdings Bhd will raise up to RM2.5 billion through such means. Aeon Credit Service (M) Bhd also has a RM400 million perpetual programme.

Perpetual bonds typically carry higher coupon rates as there is no pre-determined maturity. One of the attractions of such bonds is that they are recognised as equity rather than debt, hence reducing the debt-to-equity ratio.

This article first appeared in The Edge Financial Daily, on December 19, 2013.


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