CGS-CIMB and iSTOX launch S$150 mn digital commercial paper programme

By Leandra Monteiro

Financial services provider CGS-CIMB and private capital platform iSTOX announced the issuance of a short-term debt instrument in the form of digital securities. The S$150-million multi-tranche commercial paper will be used to fund operating expenses and near-term obligations of CGS-CIMB.

The first tranche of S$10 million was over-subscribed by accredited individual and corporate investors on the iSTOX platform. Investors were offered a 1% per annum interest rate over 3 months. The full S$150-million programme is being carried out using digital securities, with no traditional issuance happening alongside the digital channel.

The CGS-CIMB commercial paper is the first in a new product line of digital commercial papers by iSTOX, a multi-asset platform that also facilitates digital issuances for other private market securities, including funds, bonds and equity.

The CGS-CIMB digital commercial paper is now listed for trading on the iSTOX secondary exchange, giving investors the option to cash out ahead of maturity. The paper matures 3 months from its issuance, after which investors can decide whether to subscribe for a fresh 3-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. The 364-day commercial paper programme provides for multiple tranches over the next few quarters, up to a maximum amount of S$150 million, a figure that can be increased should the need arise. Taurus Point Capital was the adviser to CGS-CIMB for this issuance.

Carol Fong, Group Chief Executive Officer of CGS-CIMB said, “This is the first commercial paper programme we have done in digital securities form, and it allows us 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. Digital issuances are likely to grow and become a strong complement to traditional capital raising channels.”

Oi Yee Choo, Chief Commercial Officer of iSTOX said, “iSTOX is launching this new product line at a time when the commercial paper market is expanding both globally and in Asia. 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. To serve our investors well and safeguard their interests, we will onboard commercial paper issuers like CGS-CIMB that are reputable and well-backed, and have a strong track record and a long history of operations. 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. This significantly reduced the need to work with multiple intermediaries, which made the issuance faster and more cost efficient.”

Oi Yee Choo added, “Commercial papers are suitable for investors looking for a low-risk cash management solution. Investors earn a better yield on funds that are undeployed for various reasons. These may be funds that are in between investments or that have been earmarked for an expenditure item in the near term, such as university tuition fees or a property down payment. Compared with a fixed deposit at a bank, a commercial paper investment offers a significantly higher interest rate. 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.”

Michael Tan, Co-Founder and Executive Director of Taurus Point Capital said, “We are excited about reinvigorating the commercial paper market, which has been overlooked historically in Asia but now has good prospects of wider acceptance in a digital form. With current interest rates almost hitting the floor, commercial papers occupy a sweet spot for both short-term investors and borrowers. As an adviser, we are delighted to be able to help CGS-CIMB accomplish this efficiently and to connect with investors through our partnership with iSTOX.”