The Bangladesh Securities and Exchange Commission (BSEC) has approved the plan of Premier Cement Mills to raise Tk310.75 crore through issuing preference shares.
The top tier cement maker will use the fund – that would reduce financial costs, boost profits, and help improve financial indicators – to restructure its balance sheet, according to a BSEC statement.
Paying off high-cost debts out of the preference share proceeds will save some interest expense for the company as the average cost of bank loans is higher than the preference share dividends.
Preference shares are company shares against which investors avail no voting right and enjoy preference over the general shareholders to avail dividends in a regular situation as well as the leftover during liquidation.
Sponsor shareholders and directors of the company will buy preference shares worth Tk75 crore, the tenure of which will be 12 years, and they will take no dividends.
The company will collect Tk235.5 crore from investors through private placement of the remaining preference shares, which will be issued for 5 years, and the company will pay 6.25%-7.75% preferred dividends to the external investors per annum.
The preference shares will have a face value of Tk25 lakh each. They will be non-convertible i.e. the shares will be redeemed after tenure.
They will also be cumulative, which means any unpaid preferred dividend will be added to the next period's payable dividends.
The preference shareholders would get dividends twice a year, and the company would redeem the shares in equal semi-annual instalments, which would commence from 18 months of the issuance, according to the company documents.
Premier Cement was listed on local stock exchanges in 2013.