Singapore-listed financial services firm IFS Capital Limited is set to securitise S$79 million of loans to micro, small and mid-sized enterprises, in a transaction that will allow the company to free up capital for new lending.
Financial close for the group’s first loan securitisation programme is expected in October, IFS Capital said in an announcement. DBS Bank was the sole arranger.
The transaction involves a pool of existing loans to Singapore MSMEs that are secured by real estate. The loans will be transferred to a special purpose vehicle, which will finance the acquisition by issuing senior, mezzanine and subordinated notes.
CapitaLand Investment will subscribe for the entire principal amount of the senior notes at the first issuance.
IFS Capital will retain the mezzanine and subordinated notes, which rank behind the senior notes, leaving the lender exposed to the performance of the underlying loan pool.
The notes will have a four-year tenor. IFS Capital will continue to service the loans and maintain its relationships with borrowers, meaning the securitisation will not change the underlying borrowers’ arrangements with the lender.
The transaction gives IFS Capital a way to turn loans that would otherwise remain on its balance sheet until maturity into capital that can be deployed into new MSME financing.
The company said it intends to develop securitisation into a recurring funding and capital-management channel across different lending portfolios.
The move could also improve the efficiency with which its capital is deployed as it expands its private-credit business.
“This transaction rests on an investor’s confidence in how we underwrite and how our loans perform over time,” IFS Capital Group Chief Executive Randy Sim said.
We have structured the transaction in a way that aligns our interests with those of our investor for the life of the pool.
CapitaLand Investment’s subscription gives the real estate investment manager exposure to Singapore private credit through senior secured notes backed by property-linked loans.
Arjun Pandit, managing director and head of credit for private funds at CapitaLand Investment, said the investment expands the firm’s exposure to Singapore’s real estate private credit market.
This investment expands CapitaLand Investment’s exposure to Singapore’s real estate private credit market and advances our fund management growth strategy in the credit sector.
DBS said the deal illustrates how securitisation can bring institutional investors into lending markets while diversifying funding sources.
“This transaction demonstrates how securitisation can unlock institutional capital, enhance funding diversity and support the flow of capital to the real economy,” said Clifford Lee, DBS managing director and global head of investment banking.
IFS Capital provides working capital financing, asset-based lending and property-secured financing to MSMEs in Singapore, Malaysia, Thailand, Indonesia, and Hong Kong. Its group lending assets stood at S$475 million as of June 30.
The company was incorporated in Singapore in 1987 and has been listed on the Singapore Exchange’s Mainboard since 1993. It is part of the PhillipCapital Group.