A milestone event occurred on the 13th February 2014. The Islamic Bank of Asia (IB Asia) entered into a SG$15 million (US$11.83 million) convertible commodity Murabahah facility agreement with Ley Choon Group Holdings, an underground utilities infrastructure construction and maintenance service provider listed on the Mainboard of the Singapore Exchange Securities Trading (the SGX-ST). This investment is seen as the first Islamic private investment in private equity (PIPE) transaction in Singapore.
IB Asia is a joint venture partnership between DBS Bank, one of the largest financial services groups in Asia, and prominent investors based in the GCC. Established in 2007 and headquartered in Singapore, IB Asia focuses on merchant banking activities including direct investment, advisory, treasury and capital market services.
The Murabahah financing has an innovative, flexible structure allowing for conversion into shares of Ley Choon at the option of IB Asia at a pre-agreed conversion price.
Whilst there have been Islamic equity or equity-linked investments in Singapore, this transaction opens up a new market for Islamic investors seeking a hybrid investment in growth companies which are already listed on the SGX-ST. This may prove to be an exciting prospect for investors who prefer higher returns than fixed income investments, coupled with lower risks than upfront equity investments.
Yeo Wico is a partner at Allen & Gledhill. He can be contacted at
[email protected]
.