Suke dusts off project sukuk
Bonds Toll-road company plans M$2.5bn financing despite oppositionBY KIT YIN BOEYMalaysian toll-road operator
Prolintas Expressway is dusting
off project financing plans for
a 24.4-km elevated road, stalled
since 2011 due to opposition
from residents, as investors
maintain a risk-off attitude
toward such developments.
Project company PROJEK
LINTASAN SUNGAI BESI-ULU KLANG
(Suke) has filed two Islamic
bond programmes amounting
to M$2.5bn (US$600m) with
the Securities Commission
Malaysia. These are a M$2bn
sukuk wakalah programme,
with AmInvestment Bank as sole
principal adviser, and a M$500m
sukuk murabahah programme,
expected to have state-owned
Danajamin Nasional as
guarantor, with MIDF Amanah
Investment Bank as lead.
The guaranteed sukuk islikely to be rated AAA to reflect
the Danajamin wrap, while the
standalone bonds will probably
be in the Single A area.
Bankers say the sukuk will
end up being privately placed
to selected investors. Suke and
parent Prolintas, which is part
of state-owned Permodalan
Nasional, one of Malaysia’s
largest funds, aim to launch the
issue this month.
The Suke highway project is
a three-lane dual-carriageway
awarded to Prolintas in 2011
under a concession agreement.
Construction and financing
were scheduled to begin in
mid-2016, but residents along
the planned route have forced
Prolintas officials back to the
negotiating table after putting
up spirited protests, including
on social media.
Prolintas was pressured
into making changes suchas allowing for greater space
between homes and segments
of the planned road.
However, contracts have
recently been awarded and
signs of construction activity
are visible along the stretch,
indicating that Prolintas may
at last be able to move ahead.
In March, the project company
awarded piling works to
Malaysia’s SunGeo for Suke and
a sister project Damansara-Shah
Alam Elevated Expressway
(Dash).
The Dash project, awarded
to Prolintas in 2011, is also
significantly delayed due to
similar protests by residents.
Bankers say the Dash project
is likely to be funded mainly
through bank loans.
The negative sentiment
over the projects has added to
unfavourable assessments from
potential bond investors.“The project was shown to
us some time back and, at that
time, the credit metrics did
not look strong and sentiment
towards the project wasn’t that
hot either,” said an investor.
“We were lukewarm to their
proposals then, but, who
knows, we have not seen the
latest numbers yet.”
Total project costs are
estimated at just under
M$6bn, which will be funded
via the M$2bn standalone
project financing sukuk and
the M$500m guaranteed
bond, as well as bank loans
of around M$2bn, with the
remaining amount to come
from a previously approved
government-support loan.
AmInvestment Bank, Affin
Hwang, Bank Pembangunan and
Maybank will be joint lead
managers and bookrunners on
the standalone sukuk.
The Suke launch will come
at a time when regulatory and
political risks are growing as
investors and companies fret
that tolls or toll-fee increasesHuishan wrests creditor support
Loans Lenders facing steep haircuts under dairy company’s restructuring proposalBY MATTHEW MILLER, YAN JIANGEmbattled CHINA HUISHAN DAIRY
HOLDINGS has come to an
agreement with most of its
Chinese creditors to restructure
its crippling debt, which has
reached at least US$5.76bn,
according to a restructuring
plan Reuters seen.
The plan, first proposed
in August, shows Huishan’s
creditors claimed debts of
Rmb38bn as of the end of July.
That figure is 42% above the
previously reported Rmb26.73bn
in outstanding debts.
The group, billed as China’s
largest integrated dairy and an
erstwhile exemplar of so-called
innovative financing, has been
battling for survival with huge
outstanding debts to creditors,
including Bank of China and
HSBC.
After Reuters approachedHuishan’s creditors and
advisers with questions
about the plan, the company
announced late on Wednesday
it had reached an agreement
“in principle” with more than
half of its mainland lenders,
representing over two-thirds of
outstanding debt.
The dairy’s stock plunged
85% in March before being
suspended, three months after
US short-seller Muddy Waters
published a report claiming
the company’s financials were
fraudulent.
Most of its directors
subsequently quit, while the
company missed loan payments
and lost contact with a key
executive in charge of its
finances and cash.
Huishan has become a
cautionary tale about the
hidden risks of “innovative
financing”, after the companyraised funds from leasing
its cows and selling wealth
management products to rich
investors.
Details of the restructuring,
which involves lenders,
including BOC, Huishan’s
largest creditor, and Industrial
and Commercial Bank of China,
are still being negotiated,
sources close to the discussions
told Reuters.
Any restructuring would
see creditors accept a major
reduction in the amount they
would be repaid, with some
debt converted into equity in
a new holding company, the
sources said. The plan was
drawn up by Shenzhen Fuhai
Yintao Asset Management, an
adviser Huishan retained earlier
this year.
The debt restructuring
adviser declined to comment.
The restructuring plan callsfor a reduction of debts to a
maximum of Rmb16bn, from
the total Rmb38bn.
Huishan’s biggest domestic
creditors include BOC, which
has submitted claims of
Rmb4.36bn, along with China
Minsheng Bank and ICBC,
which are owed Rmb2.23bn
and Rmb2.04bn, respectively.
Ping An Bank, which has total
claims of Rmb2.4bn, is among
Huishan’s biggest offshore
creditors, as well a consortium
of banks led by HSBC, China
Citic Bank International,
and Hang Seng Bank, which
extended a syndicated loan to
the listed vehicle.
The August plan also said
Huishan Chairman Yang Kai
and missing finance executive
Ge Kun could not be part of
the group. Yang holds a 90%
interest in Champ Harvest, a
British Virgin Islands company,News