Malaysia's Sime eyes 4 bln rgt sukuk programme

KUALA LUMPUR Aug 26 (Reuters) - Malaysia's Sime Darby (SIME.KL), the world's top planter by landbank, plans to set up an Islamic funding programme for up to 4 billion ringgit ($1.14 billion), a senior company official said on Wednesday.

The fund-raising could could signal a revival in demand for top rated sukuk, or Islamic bonds, after issuance slumped more than 56 percent in 2008 due to the credit crunch.

"It's up to 4 billion ringgit and it is to finance working capital and some debt," said an senior Sime Darby official who declined to be identified due to company policy.

Sime Darby had previously tapped the market through an Islamic funding programme of over 1 billion ringgit, which was given the highest rating of AAAID by Malaysian Rating Corp.

"Sime is going to refinance some of the old programmes, some of the existing bank loans and this will be to cater for the company's long term funding needs," said another source who asked not to be named as the funding programme had not been announced.

There was no immediate comment from Sime.

Sime Darby is the world's largest listed oil palm plantation group with 844,000 hectares of plantation land in Asia and Africa, according to company data.

The Islamic bond market has been sustained by small issuances, mostly out of Malaysia. But recent strong demand for sharia-compliant paper by Malaysian state oil firm Petronas [PETR.UL] and the Bahrain government has sparked hopes of a modest recovery.

Petronas sold $4.5 billion of debt this month including $1.5 billion of five-year, 4.25 percent sukuk, which were priced to yield 162.5 basis points over comparable U.S. Treasuries. The bonds were priced at the lower end of initial price guidance.

Bahrain's $750 million sovereign sukuk issue in June drew an order book of about $4 billion.

But some bankers have been wary about prospects for a full recovery, forecasting that global sukuk issuance this year would be little changed from 2008's figure of around $14 billion with the pace of the economic recovery uncertain.

($1=3.517 Malaysian Ringgit)

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(Editing by David Chance)