LankaBangla to raise Tk 150cr through commercial paper

LankaBangla Finance is set to raise Tk 150 crore through commercial papers to cut its high financing costs.

A commercial paper is a short-term unsecured debt instrument issued by a company to meet interim financing needs. Usually, the debt is issued at a discount from the prevailing market interest rates. The amount will be raised in one or several tranches with validity of nine months. Eastern Bank will act as the lead arranger of the issue.

“LankaBangla will be the first non-bank financial institution in Bangladesh to raise funds by issuing commercial paper,” said Quamrul Islam, its head of treasury and financial institutions.

The fund is being raised to meet the NBFI's short-term needs, he said. The majority of the amount will be used to build asset portfolio, with a small portion going towards paying back high-cost borrowing.

Bangladesh Bank gave the permission for the issue last week. “We have received permission to issue the commercial paper with an 8 percent interest rate. But the rate may be reviewed at the time of issue.”

Prior to issuing the commercial paper, LankaBangla will hold an extraordinary general meeting on October 24 to change some clauses of its memorandum and articles of association to increase the authorised share capital to Tk 1,000 crore from existing Tk 300 crore.

LankaBangla, which started its journey in 1997 as a joint-venture financial institution with multinational collaboration, provides corporate, retail and SME financial services, stock brokerage, corporate advisory and wealth management services.

Listed on the stockmarket in 2006, each LankaBangla share traded between Tk 32.6 and Tk 33.8 before closing at Tk 32.7 yesterday.

Its net profit stood at Tk 42.45 crore in 2015, down from Tk 44.21 crore a year earlier.

Sponsors hold a 37.48 percent stake in LankaBangla Finance, institutions 31.79 percent, foreign investors 2.64 percent and general investors the rest 28.09 percent.