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Tuesday, October 4, 2022

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Royal Group’s Islamic green facility: Leading the hospitality sector

Royal Group of Companies, a property investment firm that focuses on the Asia Pacific region, has secured a landmark Islamic green financing facility in the hospitality sector from Maybank Singapore, which could lead to more Islamic financial transactions from the company in the future. NESSREEN TAMANO has the details. 

The SG$250 million (US$185.55 million) facility, which marks the Royal Group’s first foray into sustainability finance, will be used for the upcoming Raffles Sentosa Resort & Spa Singapore and the existing Sofitel Singapore Sentosa Resort & Spa.

The company aims to improve its business sustainability and enhance operation efficiency. “These Islamic green-financed hotels will embed Shariah compliant and sustainability concepts in their building design and operations,” it said.

The facility is the Royal Group’s first Islamic green financing, and also the world’s first Islamic green financing for the hospitality sector. Bobby Hiranandani, the co-chairman of Royal Group, noted: “It is a first in the world for a hospitality developer and owner to embark on Islamic green financing. Being Shariah compliant is not only going the sustainable route, but also being ethical in our approach in building and managing both properties.”

A fixed ceiling rate feature embedded in the facility structure to provide an element of certainty and the non-compounding of profit or charges in the event of late payments are both beneficial to Royal Group, particularly as its hospitality properties gear up for the resumption of international travel. “In order to conform to the market standards for green financing, the Loan Market Association (LMA)/Asia Pacific LMA Green Loan Principles provisions are also incorporated in the documentation,” Maybank Singapore told IFN.

“Corporates who take up Shariah compliant green financing may attract a wider or new customer base — domestic and international customers who opt for and support goods and services offered by ethical, sustainable and responsible companies which are also aligned with Shariah principles,” explained Gregory Seow, the head of global banking at Maybank Singapore. “We expect to see a greater convergence between the products and services offered under both the conventional and Islamic banking systems premised on ESG [environmental, social and governance].”

Following the success of the Islamic deal, Royal Group is open to tapping the Islamic capital market for its future plans. “It is possible for the group to secure another Islamic facility as we have further expansion plans. We may look into Sukuk or Islamic funds in the coming three to five years,” Bobby told IFN.

Royal Group’s Islamic facility
SG$250 million (US$185.55 million)

March 2021
StructureBilateral
Profit rateVariable profit rate, with ceiling profit rate embedded in facility
Use of proceedsTo finance Royal Group’s resort properties in Singapore
CurrencySingaporean dollar
ArrangerMaybank Singapore
Governing lawSingapore law

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