Malaysian conglomerate Sime Darby has closed the books on its very successful inaugural Islamic bond issue. The seven -year issue was sold at par yesterday with an Islamic profit yield (equivalent to a coupon) of 4.38%. The deal raised RM500 million ($131.5 million) for the revered Malasyian firm.
In yesterday's market, seven-year Malaysian government securities were trading at a mid point of 3.45% meaning that Sime Darby's issue came in at a 93bp spread. According to bankers close to the deal, this price is the lowest ever for a corporate bond deal in Malaysia and is inside the level of the nearest comparable bond, the six-and-a-half year issue for PLUS, the toll road company.
Given that Sime darby is rated triple A by local rating agency MARC, this bond was always going to be popular. Add to that the scarcity of much other comparable paper from blue chip corporate names and you have the makings of a blockbuster. According to the lead managers, HSBC and CIMB, by the time the books were closed, there was demand for six times the amount of paper on offer. Final allocations were being settled on Thursday and it is unclear at time of going to press exactly how many acocunts took part in the transaction or what is the breakdown between account types.
The deal was launched last Wednesday, when Sime Darby and the lead managers hosted a one day investor presentaion in Kuala Lumpur. At this stage it was undecided if the deal was to have a tenor of five or seven years. By Friday the bankers were giving price guidance to investors of 3.8%-3.9% for a potential five year and 4.5% to 4.6% for a potential seven year. It was decided on Tuesday to go for a seven year transacion and such was the demand that pricing came in 12 bp lower that the bottom of the indicaive range.
As this is the first issue off Sime Darby's Islamic CP/MTN programme ,it was imptant that the bookrunners manage to get as broad a distribution as possible with the tightest pricing. They appear to have achieved this goal. As one banker close to the deal noted "the issuer and the lead managers are both over the moon with this deal." All eyes will now be looking to see what Sime Darby does with its warchest. It is known to be looking at transactions but nothing has yet been revealed.