149 AUDITED FINANCIAL STATEMENTS 2021 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021 43 BORROWINGS (CONTINUED) The secured Islamic term loans consists of the following: (i) RM679,442,000 (2020: RM873,390,000) Islamic term loans is secured against a leasehold land, debenture, certain bank balances of the Group and a director of subsidiary. The secured short term trade financing consists of the following: (i) RM30,421,000 (2020: RM32,254,000) short term trade financing is secured over certain property, plant and equipment, benefits of an insurance covering finished goods, and guaranteed by some of the directors and/or shareholders of certain subsidiary companies. Islamic term loans MSM Malaysia Holdings Berhad (“MSMH”), a subsidiary of the Company is required to comply with certain financial covenants i.e. consolidated net debt and financing to equity ratio, consolidated net debt and financing to earnings before interest, tax, depreciation and amortisation (“EBITDA”) ratio and consolidated finance payment cover ratio (collectively known as ‘’financial covenants”). The financial covenants are to be complied with annually (2020: annually). As at 31 December 2021, MSMH has complied with all the financial covenants. In the previous financial year, MSHM had obtained a consent letter from its lender to defer the imposition of all the financial covenants for financial year ended 31 December 2020. The imposition was conditional upon MSMH obtaining an official valuation report addressed to its lender on a land leased by the MSMH and a prepayment of RM40,000,000. These conditions had been confirmed as fulfilled by the lender as at 31 December 2020. During the financial year, MSMH has made an additional prepayment of RM114,256,000. As a result of the prepayments, MSMH has recorded a loan modification cost of RM9,749,000. Sukuk On 31 December 2021, the Company made the first issuance of Sukuk Murabahah of RM500 million in nominal value pursuant to the Sukuk Murabahah Programme. The Sukuk Murabahah Programme has a tenure of eight (8) years from the date of the first issue of Sukuk Murabahah under the Sukuk Murabahah Programme. The tenure of each Sukuk Murabahah is between one (1) year and up to eight (8) years and is unrated. The Sukuk issued by the Company has been reflected as an unsecured borrowing pending completion of certain condition subsequent as at 31 December 2021. Upon completion of the condition subsequent, the Sukuk will be reflected as a secured borrowing.
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