Putrajaya will likely provide a guarantee on the sukuk bonds that will be issued soon to finance the Felda Land Development Authority's (Felda) acquisition of a stake in Indonesia's PT Eagle High Plantations Tbk (EHP).
Most institutional funds, which are the likeliest parties to subscribe to the bonds, are mandated to purchase high-rated bonds, such as government-backed products, StarBiz says in a report today.
The sukuk bonds will provide half of the RM2.26 billion required by Felda to acquire the 37 percent stake in EHP. According to StarBiz, the other half would be financed through loans from European banks.
“The sukuk issuance could be announced as early as late January. The debt will be serviced by the cashflow generated by Felda Investment Corp’s (FIC) assets,” a source is quoted as saying.
Felda recently concluded a deal that will see its subsidiary, FIC Properties Sdn Bhd, acquiring the stake in EHP, which attracted criticism because of the premium acquisition price for a non-controlling stake.
The proposed purchase price was roughly 580 rupiah per share, which is more than double what EHP shares are worth on the open market. EHP's shares closed at 248 rupiah yesterday.
EHP is the third largest oil palm planter in Indonesia and is controlled by Rajawali Group, which in turn answers to tycoon Peter Sondakh, reportedly a close associate of Prime Minister Najib Abdul Razak.
According to Sondakh, another Felda subsidiary, Felda Global Ventures Sdn Bhd (FGV), had initially approached EHP on the acquisition proposal several years ago and that it was possible to synergise the two companies in terms of the oleochemicals and sugar refinery business.
Although the FGV, which is having financial troubles of its own, had dropped the deal, it was picked up by its parent company.
Felda later refuted claims that it was paying too high a premium on the market price of EHP shares, on grounds that the share price was not the accepted valuation method for plantation companies.
The company said that the US$16,000 enterprise value per hectare (ev/ha) was justified when compared with similar deals in Indonesia recently. Other incentives included EHP's large landbank and success in the sugar business.- Mkini