This article first appeared in The Edge Financial Daily on January 31, 2020

KUALA LUMPUR: Sime Darby Plantation Bhd (SDP) has completed a refinancing exercise involving credit facilities worth about RM3.9 billion on marginally improved terms.

The financing facilities secured by the group in December 2019 consist of foreign currency term loans of US$830 million (RM3.39 billion) and a ringgit term loan of RM500 million, the group said in a statement.

The exercise involved refinancing of SDP’s existing term loans which are due for repayment in June 2020, restructuring and replacing some of the existing facilities with better pricing, and converting some of the group’s working capital facilities to term loans.

SDP said the exercise did not result in any increase in the group’s gearing. The group’s borrowing as at Sept 30, 2019 stood at about RM7.9 billion (excluding perpetual sukuk of RM2.2 billion).

SDP group managing director Mohamad Helmy Othman Basha said the refinancing is an integral part of SDP’s ongoing efforts to proactively manage and optimise its debt profile, as well as alleviate the group's current liquidity exposures.

“This refinancing exercise has not only resulted in a lower cost of debt for us, but it has also improved the debt maturities and increased SDP’s financial flexibility to manage our operations and finances.

“We are now in a better position to devote our management efforts towards enhancing operational efficiencies and reducing costs, while we continue to focus on executing our asset monetisation plans,” he said.

Mohamad Helmy said the group remains on track in its deleveraging exercise via excess operational cash flows as well as cash flows from major assets sales comprising of land sales which we had previously announced and sale of other non-core assets.

“Upon the realisation of our deleveraging plans, we hope to reduce the group’s gross gearing ratio from 49% as at Sept 30, 2019 to approximately 30% within the next three years,” he added.

SDP’s share price closed one sen or 0.2% higher at RM5 yesterday, with a market capitalisation of RM34.42 billion.