This article first appeared in The Edge Financial Daily, on March 25, 2016.

KUALA LUMPUR: Sime Darby Bhd announced that it had successfully made its first issuance of RM2.2 billion sukuk wakalah under its perpetual sukuk programme of up to RM3 billion in nominal value, which saw a strong order book via a limited book-build and was over 1.8 times oversubscribed from its initial target.

This allowed Sime Darby to upsize and price the offering at the final yield of 5.65% per annum, the plantations and property group said in a statement yesterday.

The issuance, with a 10-year perpetual non-call tenure, is one of the group’s initiatives to manage its gearing level.

The group said the issuance is the largest perpetual sukuk issuance globally by a non-bank, and the largest ringgit perpetual sukuk issuance so far, besides being the first perpetual sukuk globally based on the syariah principle of wakalah.

“The perpetual sukuk is part of our deleveraging efforts and we are proud that this innovative financing instrument has established a landmark in Islamic finance,” said Tan Sri Mohd Bakke Salleh, the group’s president and group chief executive.

“We are encouraged by the strong support shown by investors and this also indicates the market’s continued confidence in Sime Darby,” Mohd Bakke added.

Maybank Investment Bank Bhd is the principal adviser/lead arranger/lead manager for the sukuk programme, which has been assigned a rating of AAIS by Malaysian Rating Corp Bhd (MARC). MARC has also accorded a 50% equity credit on the issuance.

The group announced the sukuk programme back in November 2015, with the proceeds raised from the issuance to be used to refinance its debt obligations and working capital requirements.

Last month, Mohd Bakke said the perpetual sukuk issuance, together with its plans to monetise its assets overseas, will reduce the group’s gearing level to 54% by the end of the financial year ending June 30, 2016 (FY16), from 61% as at the first half of FY16.