KARACHI: The Karachi Electric Supply Company has finally launched term finance certificate worth Rs2 billion to the general public, making it the second company to enter the bond market after Engro Corporation.
Term Finance Certificates (TFC) are corporate bonds issued by companies to generate short and medium-term funds. “Investments received will be utilised for financing KESC’s permanent working capital requirements,” says a press release issued by the electricity provider.
KESC executives had earlier expected to announce the offering in November 2010.
The certificate called AZM is available in three maturities. Profit rate for the 13-month issue is 13.00% per annum, 14.75% per annum for the three-year issue and 15.50% per annum for the five-year issue. The 13-month issue’s profit is payable monthly while the other two issues will be payable quarterly. Minimum investment amount has been fixed at Rs10,000 in order to allow for broad-based participation in the venture.
Engro Corporation – which raised Rs8 billion in two offerings – offered just one period of three years for its bond with a profit rate of 14.5%. The minimum investment level was Rs25,000, more than double KESC’s offering.
The offering needed to be more attractive than Engro as KESC is not held that high by the general public due to power outages, said an analyst requesting anonymity.
The total face value of the issue is Rs2 billion including a green shoe option of Rs1 billion. The green shoe option gives the company the option to increase the total issue if the bond is oversubscribed.
Total amount offered is Rs300 million, Rs1,200 million and Rs500 million for 13 months, 3 years and 5 years issue, respectively. Principal repayment of the investment would be available at maturity. Early redemption option would also be available to investors subject to varying redemption charges and a 15 day prior notice.
Subscription to the public is available from May 25, 2012 until August 24, 2012.
Published in The Express Tribune, May 24th, 2012.