5 Key Things You Need to Know About Courts Singapore Ltd’s Credit Operations

Many of you are probably familiar with Courts (Singapore) Pte Ltd (CSL) as one of the leading electrical, IT and furniture products retailer with a presence of more than 35 years. The local-based is wholly-owned by Courts Asia Ltd (SGX: RE2) which also has presence in Indonesia and Malaysia under the subsidiaries, PT Courts Retail Indonesia and Courts (Malaysia) Sdn Bhd.

Unique among their peers, Courts Asia Ltd’s retail businesses uses an in-house credit facility in order to attract the low-income group of customers to shop at their stores. Let’s find out below how the credit facility works.

Below are 5 key facts on Singapore’s credit operations:

1. The Asset Securitization Programme 2012 (Singapore) was entered in 20 Sep 2012 between Assetrust, a wholly-owned special purpose vehicle (SPV) under Courts Singapore Ltd and HSBC Bank. It replaced the previous Asset Securitization Programme 2010 and will expire either on 21 Sep 2017 or 2018 at the option of HSBC.

2. The credit facility has a facility amount of S$150 million with S$50.2 million fixed at 5.5% interest rates. As at 30 Sep 2014, S$59.3 million has been drawn down for credit lending.

3. The credit facility is marketed to customers under the name “Courts Flexi Plan” in Singapore, targeted mainly to the low-income group of customers who have difficulties making cash upfront or may not qualify for a credit term by a bank. These schemes also allow customers repayment flexibility of up to 5 years.

4. How the credit programme works is that CSL’s receivables are securitized when credit receivables are sold into Assetrust. These receivables are then packaged into various tiers of financial instruments in priority of repayment: Senior, Sub-Senior, Seller, Mezzanine and Junior certificates. CSL retains the risks and rewards of these receivables. As HSBC is the main funding bank for CSL’s credit facility, the Bank takes on the Senior certificate (highest claim) and receives cash as customers pay down their credit back to CSL (i.e. decrease in receivables, increase in cash on CSL’s balance sheet).

5. Similar to a bank, CSL collects information through credit interviews with customers which are processed through a proprietary credit scorecard. The credit assessment team validates the scorecard through third-party verifications and field checks; scorecards are reviewed on a bi-annual basis. Credit process typically takes 2 to 3 days and may shorten for customers with a good payment record.

Are There Any Inherent Risks?

Despite stringent credit checks, these customers tend to already have difficulty making payments on Courts Singapore Ltd’s products. An increase in delinquency rates or rise in interest rate environment might impair some of the trade receivables Courts Asia Ltd hold in their books. With already such heavy competition in the retail industry, an impairment loss on receivables could strain the Group’s cash operating cycle.

Value in Action

Courts Asia Ltd uses an in-house credit facility to further entice customers to patronize their stores. However, a rise in interest rate environment or a surge in delinquency rates could impact the Group’s operating cash flow.


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All views and opinions articulated in the article were expressed in Willie’s personal capacity and do not in any way represent those of his employer and other related entities. Willie does not own any shares in the companies mentioned above.

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