Fitch Ratings-Singapore-15 January 2013

Fitch has assigned Sime Darby Berhad's (Sime Darby) proposed USD1.5bn Sukuk issuance programme an 'A' rating.

The proposed Sukuk programme set up through its SPV, Sime Darby Global Berhad, is rated at the same level as Sime Darby's senior unsecured rating in accordance with Fitch's "Rating Sukuk" criteria. Sime Darby's obligations relating 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.

The programme is structured as a sale and lease back transaction involving Sime Darby as the seller of Sukuk assets and lessee and Sime Darby Global Berhad as the purchaser of Sukuk assets and lessor. The return on the Sukuk assets is derived from lease rentals paid by Sime Darby in relation to the Sukuk assets and the repayment of debt is backed by a purchase undertaking clause which requires Sime Darby to repurchase the assets at an exercise price essentially equivalent to the nominal amount of the debt and any interest outstanding.

According to the terms outlining the transaction's structure, Sime Darby will use the proceeds of the Sukuk programme for Shariah-compliant capital expenditure, investment, working capital and other general corporate purposes.

On 11 January 2013, Fitch assigned Sime Darby 'A' Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs), with Stable Outlook. A Long-term foreign currency senior unsecured rating of 'A' was also assigned. Sime Darby's ratings reflect its strong plantations business, its large size, a diversified business portfolio and its conservative financial leverage.

The Stable Outlook reflects 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.

What could trigger a rating action?

Negative: Future developments that may, individually or collectively, lead to negative rating action include:

- A downgrade in Malaysia's Country Ceiling 'A', which would result in a corresponding downgrade in Sime Darby's Long-Term Foreign Currency IDR. Sime Darby's Long-Term Foreign Currency IDR is currently at the same level as the Malaysian Country Ceiling

- An increase in the role of the Malaysian sovereign or related entities in Sime Darby's decision-making process will result in the Long-Term Foreign and Local Currency IDRs being downgraded and placed on a par with the sovereign rating, which is currently 'A-'

- A sustained increase in financial leverage (adjusted net debt/ FFO) to over 1.75x

No positive rating action is expected in the medium term due to the cyclical nature of SIME's key businesses.

By assigning a rating to the programme, Fitch is not expressing an opinion as to whether the programme or sukuk issuance under the programme are compliant with Shariah principles.

-Ends-

Contact:
Primary Analyst
Nandini Vijayaraghavan, CFA
Director
+65 67967216
Fitch Ratings Singapore Pte Ltd
6 Temasek Boulevard
#35-05 Suntec Tower Four
Singapore 038986

Secondary Analyst
Erlin Salim
Analyst
+62 21 29026410

Committee Chairperson
Vicky Melbourne
Senior Director
+61 2 8256 0325

Media Relations
Leslie Tan, Singapore
Tel: +65 67 96 7234
Email: leslie.tan@fitchratings.com.

© Press Release 2013