Petronas tops new debt issuance, US5bil

The Petronas Twin Towers (headquarters) are seen at night in Kuala Lumpur November 20, 2015. - AFP

PETALING JAYA: The biggest fund raising exercise this year is by Petroliam Nasional Bhd (Petronas).

After six years, Petronas re-entered the debt market with a US$5bil bond issuance for its capital expenditure (capex) and possible acquisitions as well as to maintain a comfortable cash level.

It was the biggest deal in the local debt capital markets and also one of the biggest bond issuance by an Asian company this year.

The issuance was done by its unit Petronas Capital Ltd, which sold the debt papers valued at US$3.71bil, while another entity Petronas Global Sukuk Ltd had issued Islamic papers worth US$1.25bil. The debt notes were completed on March 11.

The national oil and gas company had issued 3.5% 10-year notes, 3.125% seven-year securities and five-year 2.7% sukuk, according to data compiled by Bloomberg.

The two deals mark Petronas’ tapping into the debt market after six years.

It followed the footsteps of other fundraisings done by international oil companies California-based Chevron and Texas-based Exxon as they took advantage of the low interest rates even as crude oil prices continued to decline.

The last time when Petronas went to the bond market was in 2009 with a US$4.5bil at the exchange rate of 3.50.

But in March, the exchange rate averaged at 3.68 before the ringgit weakened further to the 4.30 level currently.

Brent crude averaged just below US$54 per barrel this year, slightly lower than the US$55 per barrel as estimated by the O&G heavyweight.

Next biggest issuer of debt in the line is Tenaga Nasional Bhd’s unit Jimah East Power Sdn Bhd’s US$2.1bil (RM9bil) debt security.

The utility giant had earmarked the sukuk murabahah to finance, build and maintain the 2,000 megawatt coal-fired power plant in Jimah, Port Dickson.

To recap, TNB had bought a 70% stake in Jimah East for RM47mil from 1 Malaysia Development Bhd in July and had been raising funds for the project, coined Project 3B, which is expected to cost the company up to RM11.7bil.

In April, the Government had raised fund of US$1.5bil (RM6.46bil) through Malaysian Sovereign Sukuk Bhd.

Under the programme, the special-purpose vehicle issued US$1bil 10-year paper with a coupon rate of 3.043% while the other US$500mil is a 30-year note with a yield of 4.236%.

The sukuk was assigned an A3 rating by credit rating firm Moody’s. The sukuk would be used to invest in the purchase of an asset pool consisting of Ijara assets, the right to participate in the provision of transportation services in Malaysia, and syariah-compliant commodities, according to a statement issued by Moody’s.

Meanwhile, Danainfra Nasional Bhd raised a collective US$1.67bil (RM7.19bil) for the ongoing Mass Rapid Transit (MRT) works in the Klang Valley. The cost of MRT Line 1 was estimated at RM28bil while the second line was estimated at RM50bil.

DanaInfra Nasional is the Finance Ministry’s wholly-owned subsidiary set up in 2010 to raise funds for the country’s MRT projects.

Also in the list of the top 10 debt capital deals this year is another public transport infrastructure project, Prasarana Malaysia Bhd that had raised US$540.5mil (RM2.3bil) in March to fund works for the Light Rail Transit lines as well as for its capex requirements.

The Islamic papers, guaranteed by the Government, were issued in three tranches.

Another deal raised for an infrastructure is by Jambatan Kedua Sdn Bhd, amounting US$559.9mil (RM2.41bil), to construct, manage, operate and maintain the Second Penang Bridge.

The cost of the bridge to connect the Pearl of Orient island with the mainland is RM4.5bil.

In the private space, leisure conglomerate Genting Malaysia Bhd issued US$610mil (RM2.4bil) for the re-development of its properties in Genting Highlands, Pahang.

The casino and theme park operator had unveiled a RM3bil Resort World Genting refurbishment programme, which includes the development of the world’s first 20th Century Fox Theme Park.

The first tranche was a five-year note with a coupon rate of 4.5% per year payable semi-annually while the second tranche has a tenure of 10 years with a coupon rate of 4.9% per year payable semi-annually.