BSEC exercises 2CC power to help bond market

The Bangladesh Securities and Exchange Commission (BSEC) has allowed Ashuganj Power Station Company Ltd to extend the subscription period for its previously undersubscribed bond until November 18, 2019.

Until the regular subscription closure on October 6, investors had applied to buy bond units worth Tk35 crore only, while the planned issue size was Tk100 crore.

The BSEC (Public issue) rules-2015 say that any public offer that fails to secure 65 percent subscription will be cancelled. 

The Ashuganj Power Company recently applied to the BSEC to get an exemption from the cancellation, and the BSEC, exercising its special power through Section 2CC of the Securities and Exchange Ordinance, 1969, has allowed it for the sake of bond market development and protecting investor interest. 

Section 2CC of the ordinance has empowered the securities regulator with a rare power to decide anything even if that goes against all other relevant rules and regulations. Of course, there is a condition that the decision must be intended for the development of the capital market and to protect the interest of investors. 

Ashuganj Power issued bonds worth Tk500 crore through private placements among state-owned banks and financial institutions earlier this year to finance its 400MW power plant which is under construction.

Tk100 crore worth of bond units were kept for the public market based on government advise to increase tradable bonds in the stock exchanges. 

Capital market investors in Bangladesh had been looking for diversified investment opportunities, and bonds cater to this need. 

But market analysts said that the present state of the money market, the sentiment in the capital market, and the comparatively low interest offered against Ashuganj Power's bond had resulted in the under subscription.

The offered bond 

On July 2, the BSEC approved the company's application to issue 2 lakh units of coupon-bearing, non-convertible and redeemable bond with a face value of Tk5000 each unit. 

Fifty percent of the bond units were offered to eligible institutional investors including collective investment schemes. But the institutional investors subscribed to units worth Tk22 crore only, against Tk50 crore offered. 

The remaining 50 percent was offered to general investors including non-resident Bangladeshis. Investors who belong to this category subscribed for units worth Tk13 crore only.
The bond, with a tenure of 7 years, offers an interest rate starting from 8.5 percent to 10.5 percent. 

ICB Capital Management and BRAC EPL Investment Limited are the issue managers for Ashuganj Power, while ICB Capital also worked as the trustee of the debt securities. 

The long-term credit rating of Ashuganj Power is 'AAA', while the short-term rating is ST-1. This portrays the best financial picture in terms of paying liabilities back on time. 

This rating will be valid until December 5, 2019. Credit Rating Information and Services Ltd set the ratings after analysing the financial reports and other issues of the company up to June 30, 2018.