Citizens Bank International will soon launch first corporate debenture issue of the current fiscal year.
The bank will issue the seven year corporate bond — Citizens Bank Debenture 2077 — worth Rs 500 million at par value of Rs 1000. The bonds will yield 8.5 per cent interest rate paid quarterly.
The issue managed by Elite Capital is open from December 26 to January 1. However, if it is under-subscribed, the issue will be open till January 10. Debentures worth Rs 100 million have been set aside for public subscription. Likewise, Rs 20 million worth of bonds have been allocated to mutual funds.
The bond issue has been assigned rating of [ICRANP] LBBB by credit rating agency ICRA Nepal. According to ICRA Nepal, the instruments with [ICRANP] LBBB rating are considered to have a moderate degree of safety regarding timely servicing of financial obligations, that is, such instruments carry moderate credit risk.
Last year, Nepal’s capital market witnessed corporate debenture issues worth Rs 3.5 billion from seven commercial banks. However, this fiscal year, Citizens Bank is the first to issue the debentures amidst the ongoing liquidity surplus.
Banks mostly issue bonds to meet its regulatory capital adequacy requirement. But with low credit demand and high liquidity, most of the banks are not in need to issue bonds to increase their supplementary capital this time around.
Commercial banks have to maintain capital adequacy ratio of 10 per cent, and debentures have become a go-to instrument when their capital seems to be flailing compared to risk weighted assets that is loans. Debentures issued are included under Tier II capital — supplementary capital — of the issuing bank, thus increasing the bank’s capacity to float more loans.
Moreover, with ongoing liquidity surplus and eventual interest rate decline, the coupon rate of bond has also begun to decline.
Despite accelerated issuance of corporate bonds in capital market, general investors are not interested in bonds. Most of the bonds issued are absorbed by other institutional investors such as financial institutions and insurance companies.
source: the himalayan times,19 Dec 2013
LINK
The bank will issue the seven year corporate bond — Citizens Bank Debenture 2077 — worth Rs 500 million at par value of Rs 1000. The bonds will yield 8.5 per cent interest rate paid quarterly.
The issue managed by Elite Capital is open from December 26 to January 1. However, if it is under-subscribed, the issue will be open till January 10. Debentures worth Rs 100 million have been set aside for public subscription. Likewise, Rs 20 million worth of bonds have been allocated to mutual funds.
The bond issue has been assigned rating of [ICRANP] LBBB by credit rating agency ICRA Nepal. According to ICRA Nepal, the instruments with [ICRANP] LBBB rating are considered to have a moderate degree of safety regarding timely servicing of financial obligations, that is, such instruments carry moderate credit risk.
Last year, Nepal’s capital market witnessed corporate debenture issues worth Rs 3.5 billion from seven commercial banks. However, this fiscal year, Citizens Bank is the first to issue the debentures amidst the ongoing liquidity surplus.
Banks mostly issue bonds to meet its regulatory capital adequacy requirement. But with low credit demand and high liquidity, most of the banks are not in need to issue bonds to increase their supplementary capital this time around.
Commercial banks have to maintain capital adequacy ratio of 10 per cent, and debentures have become a go-to instrument when their capital seems to be flailing compared to risk weighted assets that is loans. Debentures issued are included under Tier II capital — supplementary capital — of the issuing bank, thus increasing the bank’s capacity to float more loans.
Moreover, with ongoing liquidity surplus and eventual interest rate decline, the coupon rate of bond has also begun to decline.
Despite accelerated issuance of corporate bonds in capital market, general investors are not interested in bonds. Most of the bonds issued are absorbed by other institutional investors such as financial institutions and insurance companies.
source: the himalayan times,19 Dec 2013
LINK
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