May 8, 2021

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CGS-CIMB issues SGD 150 million digital commercial paper


lease: CGS-CIMB and Singapore Stock Exchange-backed iSTOX fintech company have released a Trade Paper Program worth 150 million Singapore dollars (RM463.02 million), a short-term debt instrument in the form of digital securities that will raise funds to cover past operating expenses and near-term liabilities.

It stated that the first tranche of SGD 10 million of the issuance, offering an interest rate of 1% per annum over a period of three months, listed on iSTOX has exceeded its underwriting by accredited individual and corporate investors on the private capital platform.

Commercial paper is the first in a new product line for digital commercial paper by the platform, and it is also listed for trading on a secondary exchange allowing investors to exit before maturity.

After the paper matures, which is three months after its issuance, investors can choose to subscribe for another three months. In the event of an increase in the subscription in the next tranche, subscribers of the current tranche will be guaranteed an allocation if they choose to renew their investment. Additionally, the maximum sum of SGD 150 million can be increased if the need arises.

Carol Fung, CEO of CGS-CIMB, notes that the commercial paper program is the institution’s first in the form of digital securities, allowing it to benefit from an alternative source of funding and a wider range of investors.

“While working with iSTOX to launch this program, we were pleasantly surprised to have completed it in half the time that a traditional version would normally take.” She said in a statement, “Through this collaboration, we are keen to explore the digital assets and exchanges that it may hold for us as a broker in the future.

Fong believes that digital issues are likely to grow and become a powerful complement to traditional capital raising channels.

Meanwhile, iSTOX Chief Commercial Officer Oi Yee Choo said the product launch comes at an appropriate time as the commercial paper market is expanding globally and in Asia. He noted that investors want a full range of products so that each segment of their portfolio can be deployed in a way that increases returns while diversifying risks.

“In this commercial paper program, CGS-CIMB as an issuer was able to realize the maximum benefits of digital securities as it chose a 100% digital pathway, with no traditional issuance implemented alongside it,” Oi said.

He added that digital securities reduce the need to work with multiple brokers, making issuance faster and more cost-efficient. The commercial director also noted that commercial paper is suitable for investors looking for a low-risk cash management solution.

“It also helps the investor avoid the risk of incurring a penalty if funds need to be withdrawn before maturity – because the iSTOX exchange can facilitate the sale of the paper to other investors.”

Michael Tan, Issue Advisor, Co-founder and CEO of Taurus Point Capital, said the commercial paper market has historically been overlooked in Asia, but now has good prospects for wider acceptance in digital form.