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IOI Corp Offers to Buy Debt Notes
19/10/2021The Star

(File pic by IOI Corporation).

KUALA LUMPUR: IOI Corp Bhd’s unit IOI Investment (L) Bhd has announced plans to purchase its outstanding US$600mil (RM2.5bil) 4.375% notes, which are due in 2022.

The notes are guaranteed by IOI Corp under the US$1.50bil (RM6.25bil) euro medium-term note (MTN) programme.

IOI Investment (the offeror) has invited holders of the said outstanding notes to either submit tenders to purchase their notes for cash on the terms and in the tender offer to be despatched to them, according to IOI Corp in a filing with Bursa Malaysia yesterday.

The group noted that the offer, which is in conjunction with the issuance of the new notes, is part of the group’s proactive management of its funding and capital structure.The notes purchased by the IOI Investment pursuant to the offer are expected to be cancelled and will not be re-issued or resold.IOI Corp said: “The offeror will pay (on the settlement date) for any notes validly tendered and accepted for purchase by it pursuant to the offer – a purchase price of US$1,023 (RM4,268) per US$1,000 (RM4,172) of the nominal amount of such notes.

“IOI Investment will also pay (on the settlement date) an accrued interest payment in respect of any notes accepted by it for purchase pursuant to the offer.”

The offer, which commenced yesterday will expire on Oct 27.

Meanwhile, Moody’s Investors Service, in its latest report, expected IOI Corp’s leverage to decline due to stronger earnings growth amid high crude palm oil (CPO) prices and debt reduction.

The rating agency noted that IOI’s adjusted leverage – as measured by adjusted debt/earnings before interest, tax, depreciation and amortisation (Ebitda) – to decline to around 2.5 times over the next 12 to 18 months from 3.3 times for the fiscal year ended June 2021.

“This improvement will be driven by earnings growth amid high CPO prices and debt reduction of around RM400mil to RM500mil with cash on hand,” it said.

Moody’s said the demand for IOI’s palm oil products has remained solid despite the pandemic, and the company’s operations have not been significantly disrupted by periodic movement control restrictions in Malaysia. In addition, the high CPO price has boosted earnings at IOI’s plantations segment in recent quarters, despite lower CPO production amid heavy rainfall and a decline in mature planted hectarage as older trees were replanted.

In the report, Moody’s has affirmed the group’s Baa2 issuer rating, the Baa2 backed senior unsecured bond ratings of IOI Investment (L) Bhd, and the Baa2 backed senior unsecured bank credit facility rating of IOI Ventures (L) Bhd.

It has also affirmed the provisional (P) Baa2 backed senior unsecured rating on IOI Investment’s medium-term note programme.

At the same time, Moody’s has maintained a “stable” outlook on the ratings.

Moody’s vice-president and senior analyst Maisam Hasnain said: “The ratings affirmation reflects our expectation that IOI Corp will maintain profitable operations while taking a prudent approach to investment and shareholder returns, such that they do not materially weaken the company’s credit profile.”

Maisam said the proceeds from the proposed notes issuance will help IOI Corp alleviate refinancing risk associated with its notes due in June 2022, while allowing it to maintain strong liquidity.

The report pointed out IOI Corp’s Baa2 ratings reflect its established position as an efficient palm oil producer with integrated operations across the palm oil value chain, its track record of managing profitability through multiple commodity price cycles, and its ability to benefit from favourable long-term demand for palm oil.

Moody’s also expected IOI Corp to take a measured approach toward future investments such that its leverage does not exceed its downgrade trigger of 3.5 times.

The rating agency noted the company has utilised only 17% of the RM960mil it had earmarked for investments, from the RM3.8bil it had received in asset sale proceeds in 2018.

Moody’s said IOI Corp would likely use the proceeds to acquire brownfield plantation estates in Malaysia.

“If IOI Corp has not identified a suitable target, it can extend the time frame to complete an investment beyond the current extended time frame of December 2022,” it added.

IOI Corp is one of the leading global integrated and sustainable palm oil players.

On Bursa Malaysia yesterday, shares of IOI Corp closed two sen lower at RM4.03 with 694,200 shares traded.

This gave the group a market capitalisation of RM25.33bil.

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