Nasir Glass to raise Tk 100cr through commercial papers

Nasir Glass Industries, a leading float glass maker, is set to raise Tk 100 crore through commercial papers to help cut high financing costs, which will ultimately allow the company to offer more price-competitive products.   

The fund will be raised in two tranches, each consisting of Tk 50 crore with a validity of six months. Prime Bank will issue bank guarantee against the subscription amount in favour of the subscribers.

“We want to swap our high financing costs with a lower one,” said Rezaul Karim, general manager of Nasir Glass Industries.

The funds, which will be raised at 10 percent interest as opposed to the normal rate of 12-13 percent, will mainly be used to meet the working capital requirement, he added.

A commercial paper is a short-term unsecured debt instrument issued by companies to meet their interim financing needs. The debt is issued at a discount from the prevailing market interest rates.

Since it is not backed by collateral, only firms with excellent credit ratings will easily find buyers without having to offer a substantial discount (higher cost) for the debt issue.

In this regard, Nasir Glass yesterday signed an agreement with Prime Bank.

The first installment of the CP will likely be done within a week, said Touhidul Alam Khan, deputy managing director of Prime Bank.  

The CP market is likely to expand about 29 times to Tk 10,000 crore in the next five years for the low cost and easy access, according to a study by ACI, one of the leading conglomerates.  

Since its introduction in the country in October 2013, at least four companies have raised Tk 345 crore through six CPs, with half of the funds collected in just the last four months.

ACI issued the country's first-ever CP, where Eastern Bank worked as the lead arranger and agent.

In last month, the conglomerate launched its first unsecured CP. IDLC Finance worked as an agent for the issuance.

An unsecured CP is one which does not have any bank guarantee; it is issued directly by the corporate.

Many companies are interested in CP as it is a low-cost alternative to bank loans, according to industry people. 

Maturities on CPs range from 45 to 360 days.

Earlier in 2003, Prime Bank, in its role as a lead arranger and agent, arranged Tk 100 crore for Nasir Glass Industries through 14 financial institutions for establishing the float glass manufacturing project at Gazipur.