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Sime Darby Mulling Rights Issue?
Malaysia Daily Bulletin | 24 August 2015
  • Sime Darby is considering a proposal to raise up to RM6 billion through a rights issue as the group seeks to cut down its RM18 billion debts by a third. The fund-raising plan proposed by several banks pitching for the job comes after the diversified plantation company put on hold a plan in May to list its motor unit amid weak stock market condition.
  • In May, Standard & Poor’s (S&P) lowered its long-term corporate credit rating on Sime Darby by a notch from A to A- with a negative outlook. The ratings firm stated that it might revise its outlook if Sime Darby started to “markedly reduce” its debts.
  • If the rights issue exercise pans out, it will be the first time the enlarged Sime Darby group is making a cash call to its shareholders since it became a large conglomerate following a merger of all plantation companies under the group in 2007.

Significance: Despite the recent sell-off in the stock market, bankers believe there is enough domestic appetite to support an equity cash call by Sime Darby. The key shareholders are likely to take up the rights to ensure no shareholding dilution.

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