The Q&A was conducted with City Developments Limited:
1. Why did you use this particular Islamic structure? What other structures were considered?
The CDL SG$1 billion (US$715 million) Islamic Trust Certificate Program has the flexibility of raising funds through the various Shariah financing principles. The SG$50 million Trust Certificate issued on the 15th December 2009 is the second series based on Ijarah. Being a major landlord of properties in Singapore, the Ijarah structure is an appropriate choice.
2. What will this capital be used for?
The funds raised under Series 2 are deployed to meet the Shariah compliant working capital of CDL.
3. What were the challenges faced and how were they resolved?
The Sukuk were issued in the aftermath of the economic distress seen in Dubai, and investors’ uncertainty as to the redemption of Sukuk issued by Nakheel in Dubai.
Equally, the Sukuk were issued in mid-December 2009, typically a closing-out period for institutional investors before the calendar year end, both among conventional and Islamic investors. A targeted marketing campaign, showcasing the strong, and strengthening, credit profile of CDL, allowed CIMB, as sole dealer, to issue the Sukuk competitively amongst recent conventional bond issues of CDL in the second half of 2009. It further defended arguments that the Dubai situation was one of credit risk, not Sukuk structuring risk.
4. Geographically speaking, where did the investors come from?
CIMB maintains a broad investor reach in Hong Kong, Asean and the GCC for its Sukuk distribution strategies. The marketing campaign was targeted towards these regions, to both Islamic and conventional institutional investors.
5. Was this deal rated? If not, explain why
The deal was not rated. CDL itself is not rated but this has not posed an issue for us from getting the most competitive deals from the managers and investors. The fact that we are a public listed company, coupled with a high standard of corporate governance and transparency, have made CDL well known in the regional capital market. |