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Cover Story
@ Halal | november-december . 2020
Going big on Islamic equity financing
Hibiscus ’ RM2 billion private placement will also help boost the growth of the Islamic Equity Capital Market in the country
BY CAMILIA REZALI
Hibiscus Petroleum Bhd ’ s proposed
private placement of RM2 billion Islamic Convertible Redeemable Preference Shares ( CRPS ) is one of the most significant Islamic Equity Capital Market ( ECM ) transactions in recent years .
Shareholders gave the thumbs-up to the proposal at the company ’ s extraordinary general meeting ( EGM ) on Nov 3 by voting overwhelmingly in favour of it . Earlier , market regulators had approved the CRPS .
Hibiscus Chairman Zainul Rahim Mohd Zain said : “ Given the shariah-compliant status of Hibiscus , it is just natural for the company to have an Islamic structure embedded within the proposed CRPS , aimed at allowing both the Islamic and conventional funds to participate in this significant transaction .
“ The company would like to thank the market regulators including the Securities Commission ( SC ) for facilitating the approval process within the stipulated timeline ,” he said , acknowledging the Islamic CRPS was a significant transaction in the local Islamic equity market .
The company is looking at acquiring up to three mature , producing assets of a reasonable scale in Southeast Asia .
“ Hibiscus is focused on building scale in areas where we are already present . Priority will be given to assets that demonstrate strong production potential coupled with cost optimisation opportunities .”
Zainul said the private placement of the CRPS was the most appropriate mechanism to raise funds to optimise its chances of acquiring attractive assets , particularly those sold via bidding rounds with tight timelines for completion .
The conversion feature of the CRPS and the ability to issue it in tranches also ensures new equity is only created if it secures an acquisition .
commercial perspective ,
He said from a commercial perspective , it made excellent business sense .
“ As the Islamic financing market is fast growing with an extensive investor base , this instrument allows us to tap into a larger pool of potential investors with a greater reach to funds that invest in shariah instruments .”
The two billion CRPS will be issued at RM1 each , which is based on the most common denominator . It may be placed out in single or multiple tranches .
Labuan Crude Oil Terminal .
The conversion price for the second tranche of the CRPS has been fixed at RM0.48 , representing a premium of approximately 4.14 per cent over the five-day volume-weighted average mid prices ( VWAMP ) of Hibiscus shares up to Nov 6 which was RM0.4609 sen .
The company had announced the CRPS was intended to be placed out to both local and foreign investors to be identified at by way of book-building .
For illustrative purposes , Hibiscus said the effects of the proposed private placement of CRPS will result in the company ’ s issued share capital swelling to 1.59 billion units worth RM764.97 million — assuming full redemption of the entire two billion CRPS — or 4.62 billion units worth RM2.7 billion — assuming full conversion of the CRPS into new Hibiscus shares .
Hibiscus intends to utilise the net proceeds of RM1.94 billion — after defraying estimated expenses — for a maximum of three oil & gas ( O & G ) asset acquisitions located in Southeast Asia , whether directly or indirectly through entities holding such assets .