Pakistan Refinery launches bonds, targeting to raise Rs4 billion

Senior managers pledge Rs8m for three- and five-year bond issues.

KARACHI:

“Putting your money where your mouth is” may just be an everyday idiomatic expression for most of us, but the senior management of Pakistan Refinery Limited (PRL) seems to have taken it quite literally. To show confidence in the company’s financial prospects, its senior officials pledged a total of Rs8 million in their personal capacity to the issue of the company’s three- and five-year bonds on Friday.

“It seems nobody knows the company better than the people sitting around this table,” said one banker from Standard Chartered Bank, as he witnessed PRL’s senior managers signing up eagerly for the bond issue in the board room of the company’s head office during a formal launch ceremony.



The country’s third largest oil refinery has issued two separate term finance certificates (TFCs) to raise a total of Rs4 billion. The proceeds of the issue will be utilised to finance working capital requirements as well as capital expenditure needs.

TFC 1 will have a tenor of three years with an issue amount of Rs3 billion, including green shoe option of up to Rs500 million.

The green shoe option means investors can be sold more shares than originally planned by the issuer in case the demand is higher than expected. Following a quarterly payment schedule, it will pay profit at the rate of 10.55% per annum.

With an issue amount of Rs1 billion, TFC 2 will have a tenor of five years with an annual profit rate of 10.75% and a quarterly payment schedule. The minimum investment as well as the denomination of both types of bonds is Rs10,000. The subscription period began on Friday and will last three months.



Launched under the formal name of PRL Taraqqi TFC 1 and 2, they are going to be rated, listed and secured debt instruments. It is the first time that PRL has entered the bond market to raise capital.

Although PRL’s share in the country’s installed capacity is 17%, it has posted profit only once in the last five fiscal years. In 2012-13, the company posted a loss of Rs1.6 billion. For the nine-month period ended March 31, 2013, it recorded a profit of Rs919.4 million.

“It’s true that we have not generated profit for the last many years. I agree that a company’s bottom line is important, but that’s not the only way to measure its strength,” PRL CEO Aftab Husain said while speaking to The Express Tribune after the formal launch of TFCs.

Saying that the stake of foreign entities is as high as 42% in PRL, Husain said 60% of the major players in the country’s energy sector are on the company’s board. Shell Petroleum, Chevron Global Energy and Pakistan State Oil have 30%, 12% and 18% stakes in PRL, according to its shareholding structure as on March 31, 2013.

“Our top line was Rs127.2 billion last year. But our bottom line suffered because of fluctuating international oil prices and exchange rate,” he said, adding PRL is completely free of circular debt.

“I hope that the exchange rate will be stable once the deal with the IMF is finalised, thus bringing national reserves back to $15-16 billion,” he added.

Target market

Husain says the TFC issue aims to raise money from those people who have parked their savings in banking products offering returns of around 6%-7% per annum.

“Our target market does not include investors of Pakistan Investment Bonds (PIBs), Behbood Savings and Regular Income Certificates. Rather, our aim is to get the money that is lying with banks,” he said, adding even if the monetary policy is tightened by 100 basis points, the differential will still be attractive for retail investors.

Published in The Express Tribune, August 17^th, 2013.

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