MARC Ratings has placed its ratings on UMW Holdings Berhad’s (UMW) sukuk programmes on MARCWatch Developing. The rating action has been triggered by the proposed sale of Permodalan Nasional Berhad’s (PNB) 61.18% equity stake in UMW to Sime Darby Enterprise Sdn Bhd (SDESB) for a total cash consideration of about RM3.57 billion. The rating agency notes that a mandatory general offer will be made to acquire the remaining 38.82% upon the proposed transaction becoming unconditional, following which UMW is expected to be delisted.

UMW has a RM2.0 billion Islamic Medium-Term Notes Programme (Sukuk Musharakah) and a RM2.0 billion Perpetual Sukuk Programme on which MARC Ratings affirmed its AA+_IS and AA-_IS ratings with a stable outlook in July 2023. Among the rating factors, the affirmation considered UMW’s leading market position in the domestic automotive industry, its strong financial performance and healthy balance sheet. The ratings also incorporated a one-notch uplift based on implicit support from PNB.

In resolving the developing placement, MARC Ratings will revisit the support assessment factor as the proposed sale will result in SDESB becoming a direct shareholder of UMW. The rating agency is mindful that SDESB is wholly owned by Sime Darby Berhad in which PNB is a key shareholder, and that the acquisition of UMW will significantly strengthen Sime Darby’s competitive position in the automotive industry. MARC Ratings understands that Sime Darby has plans to pare down UMW’s borrowings.

The rating agency will also analyse the full credit implications on UMW’s operations and the changes in business profile from the proposed sale. MARC Ratings will complete its rating assessment in tandem with the completion of the proposed transaction. The current outstanding under the rated programmes are RM1.25 billion Sukuk Musharakah and RM1.1 billion Perpetual Sukuk.