CityDev issuing 1st tranche of Islamic bonds by year end

Source : Business Times - 22 Aug 2008

CITY Developments said yesterday that it will issue the first tranche of Islamic bonds by the end of the year, as it looks to build up its war chest.

Singapore’s second-largest developer announced last week that it plans to sell $1 billion of Islamic multi-currency medium-term notes, arranged by Malaysian bank CIMB. The deal will be Singapore’s first Islamic unsecured financing arrangement.

CIMB Group is listed on the Malaysian stock exchange through Bumiputra-Commerce Holdings.

‘We hope to do the first tranche before year-end, subject to market conditions,’ CityDev’s chief financial officer Goh Ann Nee said at a briefing yesterday.

CityDev said that it has not decided on the size or the coupon rate of the first tranche of notes. But management has indicated that the rates will be competitive and that it expects to see good institutional demand.

CityDev will use the funds to buy land or buildings, and has said that it will inject its own properties, freeing funds for new investments.

Islamic financing will allow CityDev to tap a broader base of investors, says managing director Kwek Leng Joo.

‘Many are curious why City Developments is enhancing its war chest,’ Mr Kwek said. ‘We always believe that in the midst of any economic slowdown there are tremendous opportunities.’

CityDev did not say which markets it is interested in. But management has guided that it will look at distressed assets in the region, including Vietnam, China, the Middle-East and Russia, CIMB analyst Donald Chua said in a note yesterday.

‘Given restrictions on the use of syariah/Islamic products, we believe proceeds will be used for investments primarily in residential property and commercial (office) investments,’ he added.

CIMB Investment Bank head of debt capital markets Thomas Meow said that the bank has been in discussions with other Singapore firms to set up syariah-compliant financing.

Vince Cook, chief executive of DBS unit Islamic Bank of Asia, told Reuters: ‘Given the ongoing difficult conventional market conditions, it is not surprising that issuers are looking at ways to open up new pools of investors.’

CityDev shares gained six cents to close at $10.20 yesterday.