By Xavier Kong
Mohd Bakke Salleh
Sime Darby Bhd is taking a step-by-step approach in paring down its 60% gearing level, according to Mohd Bakke Salleh, president and group chief executive of Sime Darby, with the first step a perpetual sukuk worth RM3 billion.
“The documentation for the sukuk is being prepared,” said Bakke at a press conference today, noting that the sukuk is one of the different instruments Sime Darby is looking to utilise in reducing its debt.
According to a separate regulatory filing to Bursa Securities today, Sime Darby is planning a perpetual sukuk programme of up to RM3 billion after having obtained permission from its board of directors. Maybank Investment Bank Bhd is principal advisor and lead arranger for the deal.
“It is envisaged that the utilisation of the proceeds raised from issuance(s) under the sukuk programme will include refinancing of debt obligations and working capital requirements of the Sime Darby Group,” said the group to Bursa Securities, adding submission of official paperwork to the Securities Commission will follow in due course.
Sime Darby’s gearing ratio, previously at 50% following its acquisition of Papua New Guinea-based New Britain Palm Oil Ltd (NBPOL), has now risen to 60% following the weakening of the ringgit in recent months.
Bakke told reporters that Sime Darby will be taking a step-by-step approach in reducing their gearing ratio to 40%, with the interim target of a reduction to an overall gearing level of 50% for the RM3 billion sukuk.
When asked about other measures such as reducing headcount, Bakke replied that Sime Darby already has that measure in place for its operations overseas.
“Headcount reduction started a long time ago, two years ago, in Australia and China. However, we do not see the need for the same measure here in Malaysia,” noted Bakke.
On how Sime Darby plans to further reduce its gearing level and meeting the 50% gearing target, the president and group chief executive noted that how Sime Darby proceeds to reduce its gearing is ultimately up to the shareholders.
“All we can do is prepare the documentation and take the steps. The decision is still up to the shareholders. Whether or not we move forward with a particular debt reduction method lies with them,” said Bakke.
The president of Sime Darby even noted that in an emergency, Sime Darby will still have ways to pay back the loan.
“Even if, and I emphasise the if, Sime Darby is ever pushed into a corner, NBPOL is a marketable asset. It has acres of land, a lot of which is planted with palm oil. It has crushers, it has mills. All of these are assets. We would not make an acquisition that was only for its people and technology. When an acquisition with marketable assets is made, there is value underlying the acquisition,” explained Bakke.
“Furthermore, Sime Darby has other assets it can look to,” added Bakke.
Also noted by the president of Sime Darby was that “the group has three years before we have to start paying back the bankers, so we have three years to prepare ourselves for paying the US dollar debt”, referencing the loan Sime Darby made to acquire NBPOL, where the group is only slated to start paying back in 2018.
NBPOL has begun its contribution to Sime Darby’s results, contributing 387 million metric tonnes of crude palm oil to the group in the recently ended quarter.
At the end of the trading day, Sime Darby’s shares were last traded at RM8.06, down 1 sen.
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