The stock market regulator has allowed Nagad, the mobile financial services arm of the Bangladesh Postal Department, to raise Tk510 crore through issuing zero-coupon bonds on condition that it would fulfil all regulatory requirements.
On Sunday the Bangladesh Securities and Exchange Commission (BSEC) took the decision.
But BSEC Chairman Professor Shibli Rubayat Ul Islam told The Business Standard, Nagad was given permission to issue bonds on some conditions."
Sources said the company will have to submit its trust deed registration, Credit Information Bureau (CIB) clearance of all directors and no objection certificate from its regulator.
The company does not comply with securities rules for raising funds through issuing zero-coupon bonds as the company is in a huge loss. Moreover, the company will require an operational licence from the Bangladesh Bank to raise funds, added sources.
Currently, the company is being operated under a temporary licence, which will expire on 30 September this year.
Nagad has a comprehensive loss of Tk147 crore as of April this year.
A firm must be in profit for raising funds through bonds as per BSEC debt securities rule 2021.
Retained earnings of Nagad was negative Tk324 crore and negative equity of Tk252 crore according to the deficiency letter.
Nagad's paid-up capital is Tk3.50 crore, while authorised capital stands at Tk10 crore.
Earlier, the company applied to the commission for a zero-coupon bond of face value up to Tk750 crore. The tenure of the bond is five years and the coupon rate is up to 10%.
Besides, it is a transferable, redeemable and non-convertible zero coupon bond.
According to general conditions of debt securities rules, an applicant for issuing bonds will have a good track record of profitability and liquidity generated from net operating cash flows.
If the issue is to support any new project or green field project, its forecasted financial position shall indicate a significant profitability, liquidity and ability to pay back the obligations by generating sufficient net operating cash flows. Such a forecast will have a reasonable basis.
Kiu Global, a US-based digital services company, has already expressed interest in subscribing to the bond for a BDT amount equivalent to $30 million.
Local investment bank Riverstone Capital is acting as the arranger of the bond wherein Green Delta Capital will be the trustee.