Metech International, an electronic-waste management company, is selling listed company, or listco bonds on Singapore-based crowdfunding platform FundedHere, which is hosting the securities in collaboration with the Singapore Exchange and under licence from the Monetary Authority of Singapore.
The company is expected to raise S$2million crowdfunded bonds as an alternative to Singapore’s high-yield bond market. This comes as a respite after a series of recent defaults has spooked investors. Nick Rademaker, marketing and strategy director of FundedHere said,
Due to high operating costs, traditional financial institutions lack the incentive to lend to listed companies in relatively small amounts. Listco bonds – which do not require a prospectus and can be crowdfunded in a transparent and cost-effective way – fill this funding gap by providing an alternative funding source for small to medium-sized listed companies that are struggling to raise money in today’s sluggish macroeconomic environment.
The maximum tenor for listco bonds is two years and the coupons can range from 6 to 9 percent. In addition, FundedHere charges issuers a fee of 1.5 percent per annum on the loan amount. The bonds will be held with Singapore’s Central Depository, and there will be a trustee to represent investors.
Issuers can sell up to S$5 million in listco bonds per year and do not need to file a prospectus. The bonds are denominated in units of S$50,000, rather than the typical S$250,000 in the wholesale bond market with campaigns running from 30-60 days. If the target size is not met, then no money is collected.
Metech’s issue is around 75 percent covered as of the middle of last week, with around two weeks of the offer period still to run. The offer is strictly for professional investors, including accredited ones. Accredited investors are individuals with net personal assets of at least S$2 million or annual income of at least S$300,000, or corporations with assets of at least S$10 million.
The coupon rate is 8 percent and the penalty for late payment is 12 percent, applicable to the coupon and the principal. Chairman Simon Eng, has pledged his shares as security against the bond. This group of investors has been an active buyer of high-yield issues in the Singapore bond market, but the yields on offer from listco bonds far outstrip what they can earn in a public bond deal.
The criteria for companies planning to issue such bonds must be listed on the SGX and have Singaporeans or Singapore permanent residents as majority owners. The bonds must have a lien on shareholder equity and a corporate guarantee, while companies must have positive net tangible assets and must not be on the SGX’s watch list.
Metech’s proposed bond has a tenor of two years, and 50 percent of the principal will be repaid after one year. The issuer also has an option to redeem it in full after one year without paying a penalty. Metech has a market capitalisation of S$12.7 million.
Metech harvests metal from electronic waste and trades it, but it has also expanded into supply chain management, trading third-party metals with big trading houses like Louis Dreyfus.
Metech in a news-statement said it is confident that the supply chain business will be able to give a return at least twice the coupon rate. The company said it was not confident of obtaining a loan from traditional lenders or raising equity, given its low share price and the depressed stock-market conditions.