IOI Corporation - Sells US$600mil notes at 4.375% BUY

- According to Bloomberg, IOI Corporation Bhd sold US$600mil (RM1.9bil) worth of notes yesterday. 

- The notes carry a coupon rate of 4.375%. 

- They are due on 27 June 2022. 

- Banks involved in the sale of the notes were Citigroup, HSBC, Mitsubishi UFJ and Morgan Stanley.

- The size of the notes is smaller than the US$1.5bil (RM4.7bil) Euro Medium-Term Notes (EMTN) programme proposed in May 2012. 

- We believe that investors’ appetite for notes or bonds has been affected by the economic crisis in Europe.

- According to a previous Bursa Announcement, IOI would be using proceeds from the notes to fund capital expenditure, investments/acquisitions, working capital and repayment of existing borrowings.

- We believe that IOI may be using the proceeds to redeem its US$600mil exchangeable bond issue, which is due for redemption on 15 January 2013. 

- The exchangeable bonds are currently out-of-money as the exercise price is RM10.73/share.

- We estimate that coupon payment for the notes would reduce IOI’s FY13F net profit by 2% to 3%, which is insignificant.

- Maintain BUY on IOI for the turnaround in the growth of its FFB production. IOI is also one of the more efficient producers of palm oil. 

Source: AmeSecurities