Felda to buy Indonesian stake with sukuk, bank loan

Felda to buy Indonesian stake with sukuk, bank loan

Felda’s decision to buy a 37% stake in Indonesian planter EHP is likely to have major financial implications for Felda Global Ventures, says report.

KUALA LUMPUR : The Federal Land Development Authority (Felda) plans to issue sukuk to raise 50% of the money needed to pay for its 37% stake acquisition in PT Eagle High Plantations Tbk (EHP).

The other 50% of the acquisition figure of RM2.26 billion will come via a loan from a European bank, according to a report in The Star.

Felda’s subsidiary, FIC Properties Sdn Bhd, is acquiring the stake in EHP. The Rajawali Group of Indonesia is the majority owner in EHP.

“The sukuk issuance could be announced as early as late January. The debt will be serviced by the cash flow generated by Felda Investment Corp’s (FIC) assets,” The Star quoted the source as saying.

As Felda is a government-backed agency, the report says, the sukuk, or Islamic bond, is expected to come with an explicit government guarantee.

Most institutional funds, which are the likeliest to subscribe to the sukuk, only purchase high-rated bonds and a government guarantee will ensure that the bonds are rated at or close to the top investment grade.

Opposition figures have criticised the deal, saying the price was too high and that it would not benefit Felda settlers. Even CIMB Group chairman Nazir Razak had said the price was too expensive.

The purchase price translates to about 580 rupiah (19 sen) per share. Yesterday, EHP’s shares closed at 278 rupiah per share, about 50% below the proposed offer price.

Felda to buy Indonesian stake with sukuk, bank loan
December 28, 2016 – FMT


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