Portion of $682m bond by industrial giant Sembcorp latest asset to be tokenised
A sustainability-linked bond has been tokenised for trading on the blockchain, as more institutions wake up to the efficiency and reduced cost offered by crypto platforms.
Singapore-based United Overseas Bank (UOB) worked with digital securities exchange ADDX to tokenise S$50 million (A$50.5 million) of the S$675 million (A$682m) sustainability-linked bond issue, by energy and urban development company Sembcorp.
The 10-and-a-half-year sustainability bond is due in 2032 and priced at a coupon rate of 2.66 per cent per annum — but if Sembcorp doesn’t meet its greenhouse gas reduction targets by the end of 2025, the rate will step up by 0.25 points per annum.
“At UOB, we believe in being at the forefront of providing progressive financial solutions that meet the needs of companies,” said Frederick Chin, UOB head of group wholesale banking and markets.
“This means anticipating market trends and having the foresight to strike new collaborations with like-minded parties, such as ADDX.”
The collaboration will help corporate clients tap the benefits of digital bond issuance for security, time and cost efficiencies, Chin said.
ADDX uses a permissioned version of Ethereum, allowing accredited investors from all over the world to trade on its regulated platform.
“The use of distributed ledger technology and asset tokenisation has a strong potential in radically improving how capital markets can operate in the future and it is important our clients can take advantage of such new technologies,” Chin said.
ADDX chief commercial officer Oi Yee Choo said that “in the past year, digital securities have achieved a high degree of acceptance among blue-chip issuers of bonds and other securities globally.”
Digital securities are especially well suited for sustainability-linked bonds, because smart contracts can automate actions throughout the life cycle of a bond, including adjustments to the coupon rate, if needed.
“As digital bonds enter a phase of widespread adoptions, the cost of fundraising through bonds and other fixed income instruments will continue to fall, and companies that embrace the new technology will be able to raise capital more efficiently.”