PETALING JAYA: CGS-CIMB and Singapore Exchange-backed fintech company iSTOX have issued a S$150 million (RM463.02 million) commercial paper programme, a short-term debt instrument in the form of digital securities which will raise funds for the former’s operating expenses and near-term obligations.
It stated that the first tranche of S$10 million of the issuance, which offers a 1% per annum interest rate over three months, listed on iSTOX was oversubscribed by accredited individual and corporate investors on the private capital platform.
The commercial paper is the first in a new product line of digital commercial papers by the platform, and it is also listed for trading on its secondary exchange allowing investors to cash out ahead of maturity.
Following the maturity of the paper, which is three month from its issuance, investors can opt to subscribe for another three-month term. If the next tranche is oversubscribed, subscribers of the current tranche will be guaranteed an allocation if they choose to roll over their investments. In addition, the maximum amount of S$150 million can be increased should the need arise.
CGS-CIMB group CEO Carol Fong remarked that the commercial paper programme is the institution’s first in the digital securities form, allowing it to tap an alternative source of funding and a wider spectrum of investors.
“In working with iSTOX to launch this programme, we were pleasantly surprised that it was completed in half the time a traditional issuance would usually take. Through this collaboration, we are keen to explore first-hand what digital assets and exchanges might hold for us as a broker in the future,” she said in a statement.
Fong opined that digital issuances are likely to grow and become a strong complement to traditional capital raising channels.
Simultaneously, iSTOX chief commercial officer Choo Oi Yee said the launch of the product is timely as the commercial paper market is expanding both globally and in Asia. She pointed out that investors want a full range of products so that each segment of their portfolio can be deployed in a manner that maximises returns while diversifying risks.
“In this commercial paper programme, CGS-CIMB as an issuer was able to realise the maximum benefits of digital securities because they chose a 100% digital route, with no traditional issuance carried out alongside it,” Choo said.
She added that digital securities reduce the need to work with multiple intermediaries, making the issuance faster and more cost efficient. The chief commercial officer also pointed out that commercial papers are suitable for investors looking for a low-risk cash management solution.
“It also helps the investor avoid the risk of incurring a penalty should there be a need to withdraw funds ahead of maturity – since the iSTOX exchange can facilitate the sale of the paper to other investors.”
The issuance’s adviser Taurus Point Capital co-founder and executive director Michael Tan said the commercial paper market has been overlooked historically in Asia but now has good prospects of wider acceptance in a digital form.