In a bid to raise cash, the country’s largest cellular service provider Mobilink has decided to issue privately placed term finance certificates worth Rs2 billion on the Karachi Stock Exchange.
Privately placed term finance certificates are being offered to banks, other financial institutions and not the general public.
This will be the cellular service provider’s second listing on the bourse as it raised Rs4.26 billion in 2008 through listing of unsecured term finance certificates.
The TFCs will have a maturity of four years with a return of KIBOR rate plus 2.65% per annum, says a notice issued to the Karachi Stock Exchange on Friday. The three month KIBOR offer rate stood at 11.99% on Friday, hence the return will be an estimated 14.64%.
Mobilink will list the debt instrument on July 4 while trading will commence a day later.
The return offered by Mobilink, formally listed as Pakistan Mobile Communications Limited, to institutional investors is in line with the rate offered by Karachi Electric Supply Company (KESC) in its Term Finance Certificates offered to the general public. The KESC TFC, offered to the general public is available in 13 months maturity with a profit rate of 13%, 3 years with a return of 14.75% and 5 years with a return of 15.5% per annum.
TFCs usually have a higher return than safer investment avenues like treasury bills, says an expert.
Arranging a privately-placed term finance certificate issue takes considerably less time and can be achieved four to eight weeks. Approvals are not required from regulatory authorities (stock exchanges, SECP) and the credit-rating of the entity and instrument need not be obtained, according to United Bank’s website.
The stock market is not new to debt instruments as Azgard Nine, Bank Al Habib, Engro Fertilizer, NIB Bank and Faysal Bank are few of the companies with term finance certificates listed on the bourse.
The profit will be paid on a quarterly basis on the outstanding principal amount. The minimum amount per transaction will be Rs1 million.
Meanwhile, the base rate – Karachi Inter-Bank Offered Rate (KIBOR) – will be set for the first coupon on the last working day prior to the disbursement date and subsequently on the preceding day before the start of each quarter.
Published in The Express Tribune, June 30th, 2012.