SINGAPORE: A new platform for listed companies to raise capital through short-term bonds has taken off, with e-waste company Metech International the first to come on board, said crowdfunding platform FundedHere on Tuesday (Nov 29).
Metech is issuing S$2 million worth of short-term bonds - known as ListCo Bonds - at an annual coupon rate of 8 per cent, with a 24-month term. The company is listed on Singapore's secondary Catalist board.
The funds raised will go towards working capital, said Metech chairman Simon Eng.
Acknowledging that interest rates at banks could be lower than what the company pays for by using ListCo, Mr Eng said the commodities rout has made it less attractive for banks to offer loans to his company.
"We foresee that because of this perceived risk in the metal industry, the bank will be less willing to lend,” he said. “Not that we are not trying - we will try - but we want to do that for a long-term investment."
In March, FundedHere became the first licensed crowdfunding platform in Singapore but this is the first time a company is issuing ListCo Bonds using the platform as the facilitator. Companies can issue these bonds and raise funds of between S$2 million and S$5 million. The tenure for bonds under the platform ranges from one to two years, with a coupon rate of 8 to 9 per cent per annum, said FundedHere executive director Agnes Siaw.
The conditions for the bonds are dependent on the requirements of the company and are evaluated on a case-by-case basis, said FundedHere CEO Michael Tee. The criteria for companies looking to issue ListCo Bonds include majority ownership by Singaporean or Singapore permanent residents, as well as those not being on the SGX watchlist.
MORE THAN S$1 MILLION ALREADY RAISED BY METECH
Metech has already raised more than S$1 million in funds from around 10 investors.
FundedHere said it is confident the full sum will be raised. The subscription period for ListCo Bonds runs for 30 days.
Only accredited investors registered with FundedHere can subscribe to the bonds issued. The company said it is targeting a minimum subscription of S$50,000 each from investors for ListCo Bonds.
In a press release, FundedHere said it has registered close to 1,000 such investors, defined as individuals with at least S$2 million or US$1.5 million in net personal assets, excluding their primary residence, or S$300,000 in annual income.
To protect investors, Ms Siaw said FundedHere conducts due diligence on the companies looking to issue bonds. For instance, ensuring that the company meets criteria such as not making losses for three consecutive years. It also ensures that the company has collateral with FundedHere, in the form of personal guarantee, or pledging shares to the trustee that the investor has appointed.
"Understand the company's financial condition, and understand the founders behind, the management team, are more important than anything else," she said.
Meanwhile, FundedHere will become the first private funding platform to use the Singapore Exchange's Central Depository (CDP) services, where lenders will receive interest payments in their CDP accounts. While not having a regulatory role in this arrangement, SGX's head of equities and fixed income Chew Sutat added that the bourse could consider extending the services to other platforms.
"To the extent that the depository services can be used to help increase efficiency for platforms licensed by MAS, have good processes behind it, target the appropriate investors, and be able to facilitate the right type of due process and evaluation of the companies that come on board, then I think we will be able to consider,” he said.
Aside from Metech, FundedHere expects a second company to issue ListCo Bonds in the coming weeks.