SUKUK WAKALAH: GCB COMPLETES FIRST TRANCHE ISSUANCE WORTH RM300 MLN

KUALA LUMPUR, Dec 4 -- The world’s fourth largest cocoa grinder, Guan Chong Bhd (GCB) has completed its first tranche issuance of Islamic Medium Term Notes (Sukuk Wakalah) worth RM300 million.

The sukuk wakalah has a tenure of seven years and was assigned a preliminary rating of AA-IS with a stable outlook by Malaysian Rating Corporation (MARC).

Managing director and chief executive officer Brandon Tay Hoe Lian said the issuance of sukuk wakalah represents the best avenue for the company to tap into funds for its expansion plans, while benefiting from the low interest rate environment.

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“This would be advantageous in allowing us to maintain our growth trajectory, while also keeping our financing costs low,” he said in a statement.

GCB's gross gearing after the issuance will remain healthy with the majority of borrowings comprising short-term working capital for cocoa bean purchases, which are largely backed by orders from its customers.

The group's gross gearing stood at 0.92x as at Sept 30, 2020, based on total borrowings of RM1.1 billion, and is estimated to increase only marginally after retiring certain short term borrowings immediately after the Sukuk fund comes in.

Finance costs for the nine months ended Sept 30, 2020 amounted to RM19.9 million, which was 11.7 times covered by the group’s earnings before tax and interest of RM232.7 million.

GCB is currently setting up a 60,000 metric tonne (MT) cocoa grinding facility in Cote D’Ivoire, West Africa at an estimated cost of between 50 million and 60 million euros, being the first phase of its investments into the world’s largest cocoa beans producing country.

Upon completion in second half of 2021, the new facility would increase the group’s annual grinding capacity to 310,000 metric tonnes (mt) from its current capacity of 250,000 mt.

GCB is also in the midst of converting its recently acquired factory in UK to manufacture value-added liquid cocoa products and confectionery ingredients.

The factory is expected to be commissioned in the second half of 2021, and will further strengthen the company’s branding and distribution network in Europe.

GCB may issue subsequent tranches of its remaining sukuk wakalah worth up to RM500 million, anytime over the next 20 years.

The Sukuk Wakalah programme also enables GCB to retain its shariah-compliance status for its balance sheet, catering to the requirements of a broad range of investors.

The programme bears a coupon rate of 3.84 per cent per annum.

-- BERNAMA