Bank Alfalah’s bonds four times oversubscribed

Fifth issue of bonds attracts Rs4.08b against target of Rs1.25b.

KARACHI: The fifth issue of Bank Alfalah’s term finance certificates (TFCs) was almost four times oversubscribed, which shows that there is a high demand for such instruments in the market, BAF CEO Atif Bajwa told the media at the listing ceremony of the corporate bonds in Karachi Stock Exchange's trading hall on Thursday.

“We should bring more debt instruments to the market,” Bajwa said. “We believe this will help spur growth in capital markets and increase the market size.”

The bank received Rs4.08 billion, 3.7 times oversubscription, against Rs1.25 billion it targeted to raise from the initial public offering of the latest rated, listed, unsecured and subordinated corporate bonds held on February 19 and 20.

“The overwhelming response shows the confidence that investors have in our bank,” the CEO said.

Responding to a question about the money raised, he said it will be spent in the bank’s routine operations – expanding the bank’s network and increasing its capital adequacy ratio (CAR).

BAF currently operates through a network of 471 branches across 163 cities of the country. “We will be well over 500 branches by the end of 2013,” Bajwa told journalists.

Speaking on the occasion, State Bank of Pakistan’s former governor Salim Raza said the bond market is bigger than the equity market in the rest of the world. However, in Pakistan it is a fraction of the equity market. This TFC is, therefore, a good step towards changing this equation, he said.

However, the government’s rates are for short term, Raza said, adding current average maturity of bonds is 15 months, which can be increased to three years and eventually to five years.

“The response to BAF’s TFCs shows that investors have confidence in our market,” said Arif Habib Group Chairman Arif Habib, who was also present at the ceremony.

“Such instruments will increase the size of our market and at the same time general public will have the opportunity to invest and get better rates,” he said.

BAF is offering six-month Karachi Inter-bank Offered Rate (Kibor) plus 1.25%. Six-month Kibor for March 28, according to the State Bank, was 9.3%.

Published in The Express Tribune, March 29^th, 2013.

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