The regulatory body Bangladesh Securities and Exchange Commission (BSEC) has approved bonds of 2 thousand crore rupees of 5 banks listed in the capital market. The banks are – Dhaka Bank plc, Islami Bank plc, Bank Asia plc, Trust Bank plc and Exim Bank plc.
The bond issue proposal of the companies was approved in the 932nd commission meeting held on Tuesday (November 19) under the chairmanship of BSEC Chairman Khandkar Rashid Maqsood.
As mentioned in the press release, Dhaka Bank’s Tk 400 crore bond will be an unsecured, non-convertible, floating rate and redeemable 4th subordinated bond. The bond will be issued through private placement to institutional investors and high net worth individual investors. The face value of each unit of this bond is Tk 10 lakh. Dhaka Bank will strengthen its Tier-II capital base by raising funds through the bond issue. DBH Finance plc is acting as the bond trustee and BRAC EPL Investments Limited is acting as the arranger. The bond will be listed on the Alternative Trading Board.
Islami Bank’s Rs 500 crore bond will be a Mudaraba unsecured, non-convertible, floating rate and redeemable fifth subordinated bond. The coupon rate of which will be determined by adding 3 percent to the reference rate. The bond will be issued through private placement to institutional investors and high net worth individual investors. The face value per unit of this bond is Tk 50 lakhs. Islami Bank will strengthen its Tier-II capital base by raising funds through the bond issue. DBH Finance plc is acting as trustee for the bond and UCB Investments, Prime Bank Investments and Islami Bank Capital Management Limited are acting as arrangers. The bond will be listed on the Alternative Trading Board.
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Bank Asia’s Rs 400 crore bond will be an unsecured, non-convertible and redeemable floating rate subordinated bond. The proposal was approved by the Trustees subject to the submission of the Certificate of Registration. It will be issued through private placement to institutional investors and high net worth individual investors. The face value per unit of the bond is Rs.1 Crore. Note that Bank Asia’s Tier-II capital base will be strengthened by raising money through this bond issue. BRAC EPL Investments Limited is acting as the bond trustee and Citibank Capital Resources Limited is acting as the arranger. The bond will also be listed on the Alternative Trading Board.
Trust Bank’s Rs 450 crore bond will be an unsecured, non-convertible, floating rate and fully redeemable subordinated bond. The bond has been sanctioned subject to submission of trustee registration certificate. The coupon rate of the bond will be determined by adding 3 percent to the reference rate. The bond will be issued through private placement to institutional investors and high net worth individual investors. The face value of each unit of this bond is Tk 5 lakh. Trust Bank will strengthen its Tier-II capital base by raising funds through the bond issue. BRAC EPL Investments is acting as the bond trustee and UCB Investments Limited is acting as the arranger. The bond will be listed on the Alternative Trading Board.
Exim Bank’s Rs 250 crore bond will be an unsecured, non-convertible and redeemable floating rate subordinated bond. The proposal was approved by the Trustees subject to the submission of the Certificate of Registration. The coupon rate of the bond will be determined by adding 3 percent to the reference rate. It will be issued through private placement to institutional investors and high net worth individual investors. The face value per unit of the bond is Tk 5 lakh. Exim Bank’s Tier-II capital base will be strengthened by raising money through this bond issue. DBH Finance plc is acting as the bond trustee and UCB Investments Limited is acting as the arranger. The bond will also be listed on the Alternative Trading Board.
What are the potential benefits for banks in Bangladesh after the BSEC’s bond approval?
Interview: BSEC Approves Bonds for Major Banks – A Closer Look
Time.news Editor (TNE): Welcome to Time.news! Today, we’re delving into the recent decision by the Bangladesh Securities and Exchange Commission (BSEC) to approve bonds amounting to 2 thousand crore rupees for five significant banks. Joining us is finance expert Dr. Sarah Rahman, who specializes in capital markets. Welcome, Dr. Rahman!
Dr. Sarah Rahman (DSR): Thank you for having me! I’m excited to discuss this important development.
TNE: Let’s dive in. The BSEC has approved bonds for Dhaka Bank, Islami Bank, Bank Asia, Trust Bank, and Exim Bank. What does this mean for the banks and the overall capital market?
DSR: This approval is a strategic move for these banks as it allows them to strengthen their Tier-II capital base. It essentially provides them with additional financial stability and flexibility. From a broader perspective, it indicates confidence in the financial sector, which can attract further investments into the capital market.
TNE: You mentioned the Tier-II capital base. Could you explain what that is and why it’s significant?
DSR: Certainly! Tier-II capital refers to the capital that banks hold in addition to their required minimum capital (Tier-I capital). It acts as a buffer against financial shocks and helps absorb losses. By issuing bonds, these banks can raise Tier-II capital, which is crucial for their long-term sustainability and compliance with regulatory requirements.
TNE: Each bond comes with different characteristics. For instance, Dhaka Bank’s bond is described as an unsecured, non-convertible, floating rate bond. What implications do these features have?
DSR: These features can significantly influence investor perception and risk appetite. An unsecured bond indicates that there is no collateral backing it, which usually means higher risk and, consequently, a higher yield for investors. The floating rate aspect means that the interest payments can vary, which can be attractive in a rising interest rate environment. However, it also introduces some uncertainty for investors regarding future cash flows.
TNE: Islami Bank’s bond is a Mudaraba, which is an Islamic finance concept. How does this differ from conventional bonds?
DSR: A Mudaraba bond is structured based on profit sharing rather than debt obligation, aligning with Islamic finance principles. Investors in this type of bond essentially become partners in the venture, sharing both profits and risks. This can attract a different segment of investors who prefer Sharia-compliant investment options.
TNE: There are arrangements involved with the issuance of these bonds, such as the involvement of DBH Finance plc and UCB Investments. How do these roles play into the bond issuance process?
DSR: The roles of arrangers and trustees are vital in managing the bond issuance process. Arrangers help structure the bond, coordinate with investors, and ensure regulatory compliance. Trustees, on the other hand, oversee the bond’s performance and ensure that the terms are being upheld, safeguarding investors’ interests. Their expertise adds credibility to the process.
TNE: Long-term, how do you see the impacts of these bond issuances shaping the financial landscape in Bangladesh?
DSR: Long-term, successful bond issuance can lead to deeper capital markets in Bangladesh, fostering economic growth. It can encourage more banks to explore bond financing, diversify their funding sources, and improve their capital position. Ultimately, a robust capital market can attract foreign investment, providing a substantial boost to the economy.
TNE: Dr. Rahman, thank you for your insights! This approval by BSEC seems to pave the way for a healthier financial market.
DSR: It was my pleasure. I’m hopeful that this will lead to greater financial resilience and growth in Bangladesh’s banking sector.
TNE: For all our listeners, stay tuned as we continue to bring you the latest updates on the capital market and economic developments. Thank you for joining us!
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(End of Interview)