KUALA LUMPUR:Moody’s Investors Service has downgraded the outlook for Sime Darby Bhd’s sukuk and medium-term note (MTN) programme to “negative” as the diversified conglomerate – which is involved in plantations, property and motors – had been impacted across the board.
The international ratings agency said yesterday that Sime Darby was affected by the slower rate of growth in China and most Asia-Pacific economies, lower commodity prices and a weaker ringgit.
“This has seen leverage surge to over four times for the year ended June 30, 2015 from 1.5 times for FY2012,” it said.
In the report, Moody’s affirmed Sime Darby’s A3 issuer rating and A3 senior unsecured debt rating on the sukuk issued by its unit, Sime Darby Global Bhd.
Sime Darby Global’s (P)A3 senior unsecured MTN programme rating has also been affirmed.
However, the rating agency explained the outlook for both ratings was negative.
“The A3 rating is not sustainable at four times leverage but the company, during last week’s results briefing, indicated that over the next six to nine months gearing – as measured by debt/equity – could fall to around 35%-40% from 58% currently.
“On that basis, and given the company’s long track record, the rating action has been limited to a negative outlook at this time,” said Moody’s.
Moody’s vice-president and senior credit officer Alan Greene cautioned that failure to deliver on the de-gearing within six months could lead to further erosion in Sime Darby’s ratings.