KUALA LUMPUR: SapuraKencana Petroleum Bhd (SKP), through its wholly-owned subsidiary SapuraKencana TMC Sdn Bhd (SKTMC), signed a US$2.3 billion (RM8.2 billion) equivalent Islamic facility agreement yesterday to convert a portion of its existing conventional multi-currency facility (MCF) borrowings into a facility based on the syariah principle of Murabahah with 11 local, regional and international banks.

The transaction represents the largest Islamic facility in Malaysia to date, according to a major bank involved in the deal.

With the completion of this transaction, SKP (fundamental: 1.3; valuation: 1.8) said it is now on track to return to the Securities Commission Malaysia’s (SC) list of syariah-compliant securities by meeting the debt over total assets financial ratio benchmark.

“This is testament to SKP’s commitment to support Malaysia’s ongoing initiatives and efforts in positioning itself as an international Islamic financial centre,” said SKP president and group chief executive officer Tan Sri Shahril Shamsuddin.

“We have been working very closely with our group of MCF lenders and we are grateful for the strong commitment and continued support from the lenders, which have allowed us to accomplish another significant milestone”, he said.

The upstream oil and gas player was removed from the SC’s syariah-compliant list on Nov 27 last year. It was excluded from the list as it did not meet one of the three criteria, which requires that conventional debt not exceed two thirds of a company’s total assets.

Subsequently, The Edge Financial Daily reported on Dec 1, quoting sources, that SKP planned to be back on the list in the next review by the SC in May this year.

“SKP’s borrowings have been completely conventional debts as Malaysian banks do not have large enough US dollar Islamic products or the limit to support SKP. This fact has been explained to the SC by a major lender,” a source reportedly told the daily.

The daily also said then that the group had been working with 14 banks and obtained approvals to convert their required portions into syariah-compliant debt to meet the SC’s requirements.

The debt conversion, it reported then, was expected to be completed before the end of its financial year ending Jan 31, 2015.

SKP closed up five sen yesterday to RM2.44, giving it a market capitalisation of RM14.62 billion.

This article first appeared in The Edge Financial Daily, on January 16, 2015.