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Bond Market & Preferred Stock in Bangladesh
 

Bond Market & Preferred Stock in Bangladesh

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    Bond Market & Preferred Stock in Bangladesh Bond Market & Preferred Stock in Bangladesh Presentation Transcript

    • BOND MARKET &PREFERRED STOCKS in BANGLADESH
    • WHAT IS BOND• A long-term debt instrument issued by a corporation or government.• A debt security, under which the bond issuer owes the bond holders a debt and, depending on the terms of the bond, is obliged to pay them interest (the coupon) and/or to repay the principal at a later date, termed the maturity.• Thus a bond is a form of loan: the holder of the bond is the lender (creditor), the issuer of the bond is the borrower (debtor), and the coupon is the interest.• Interest is usually payable at fixed intervals (semiannual, annual, sometimes monthly).
    • BONDS V/S STOCKS• Bonds and stocks are both securities• Stockholders (capital) have an equity stake in the company (i.e. they are owners), whereas bondholders have a creditor stake in the company (i.e. they are lenders).• Bonds usually have a defined term, or maturity, after which the bond is redeemed, whereas stocks may be outstanding indefinitely. An exception is an irredeemable bond, such as Perpetual bonds, i.e. a bond with no maturity.
    • VARIOUS TYPES OF BONDSPERPETUAL BOND• A bond with no maturity date.• Not redeemable but pay a steady stream of interest forever.• Similar to stock dividend payments - as they both offer some sort of return for an indefinite period of time.ZERO COUPON BOND• Makes no periodic interest (coupon) payments but instead is sold at a deep discount from its face value.• No interest (coupon) is paid to the bond holders.• The difference between issue price (discounted price) and redeemable price (face value) itself acts as interest to bond holders.
    • VARIOUS TYPES OF BONDSFLOATING RATE BOND• Coupon rate to be provided to the bond holders is not specified.• Coupon rate keeps fluctuating from time to time, with reference to a benchmark rate.CONVERTIBLE BOND• Bond holder can convert the face value of the bond into shares of common stock in the issuing company or cash of equal value, at an agreed-upon price.NON ZERO COUPON BOND WITH FINITE MATURITY• Interest (coupon) are paid by the bond issuing company to the bond holder periodically during the maturity period.• Upon maturity, the bond can be redeemed into its face value.
    • BOND MARKET IN BANGLADESHOnly 3 bonds listed in Dhaka Stock Exchange: • BRAC BANK SUBORDINATED 25% CONVERTIBLE BOND (BRACSCBOND) • IBBL MUDARABA PERPETUAL BOND (IBBLPBOND) • ACI 20% CONVERTIBLE ZERO COUPON BOND (ACIZCBOND)
    • BRAC BANKSUBORDINATED 25% CONVERTIBLE BOND (BRACSCBOND)
    • BRAC BANK SUB. 25% CONV. BOND• Subordinated Bond is ranked / prioritized lower than other debts or other classes of bonds, if the bond issuing company falls into liquidation or bankruptcy; which means: in the event of liquidation, all secured bonds and similar debts must be repaid in full before the subordinated bond is repaid.• Such bond is referred to as subordinate, because the debt providers (the lenders) have subordinate status in relationship to the normal bond. A subordinate bond carries higher risk, but also pays higher returns than other classes.• 25% Convertible bond, which means the bond holder (investor) have the option of redeeming the entire face value of the bond in cash upon maturity or can redeem 75% in cash and convert 25% of the bond value in the common stock of BRAC Bank Ltd.
    • BRAC BANK SUB. 25% CONV. BONDBASIC INFORMATION• Listed in Stock Exchange: 2011• Market Category: A• Face Value: 1000.0• Market Lot: 5• Total no. of Securities: 3000000• Paid-up Capital: 3000 millions BDT (The bank issued 3 million bonds of Tk. 1,000 each worth Tk. 3000 million)• Credit Rating: rated as A+ by Credit Rating Information and Services Ltd (CRISL)• Trustee: The City Bank Limited• Issue Manager: IDLC Finance Limited
    • BRAC BANK SUB. 25% CONV. BONDFEATURES• This bond is issued to raise capital and undertake normal commercial banking activities by BRAC Bank Ltd.• Upon maturity, this bond can be redeemed as the entire face value in cash or can be redeemed as 75% cash and remaining 25% converted in the common stock of BRAC Bank Ltd.• Maturity period of the bond is 7 years (84 months).• The interest (coupon) rate is set at 12.50 percent during the entire maturity period, which means investor will annually gain 125 Tk. for each bond, 625 tk per each lot.• 5 bonds will be bundled together to make a lot, the minimum subscription amount is Tk. 5,000 or multiple of Tk. 5,000.• Only 10% public share and the remaining 90% owned by financial institutes.
    • BRAC BANK SUB. 25% CONV. BONDBOND SCHEDULE
    • BRAC BANK SUB. 25% CONV. BONDMARKET PRICELast 1 year (March 2012 - Feb 2013): Highest: 1100 and Lowest: 1000
    • BRAC BANK SUB. 25% CONV. BONDMARKET PRICELast 1 month (Jan 13 2013 - Feb 11 2013): Highest: 1100 and Lowest: 1030 BDT
    • BRAC BANK SUB. 25% CONV. BONDNUMBER OF TRADESLast 1 year (March 2012 - Feb 2013): Highest: 13 and Lowest: 0
    • BRAC BANK SUB. 25% CONV. BONDNUMBER OF TRADESLast 1 month (Jan 13 2013 - Feb 11 2013): Highest: 6 and Lowest: 0
    • BRAC BANK SUB. 25% CONV. BONDPROS & CONSBenefits• Convertibility option allows the investor (bond holders) to redeem their bond as the common stock of BRAC Bank and enjoy significant capital gain.• Annual 12.5% interest (coupon) rate per year until maturity.• A+ credit rating indicates BRAC Banks high strength in paying back the periodic interest (coupon) along with face value upon maturity to the bond holder.Drawbacks• A subordinate bond carries higher risk and it is ranked / prioritized lower than other debts or other classes of bonds, if the bond issuing company falls into liquidation or bankruptcy• Lack of awareness of investors about the bond’s features and also about the bond market.
    • IBBL MUDARABAPERPETUAL BOND (IBBLPBOND)
    • IBBL MUDARABA PERPETUAL BOND• Perpetual BOND, which means no maturity.• BOND holders will only receive interest (coupon) periodically from the BOND issuer forever.BASIC INFORMATION• Listed in Stock Exchange: 2007• Market Category: A• Face Value: 1000.0• Market Lot: 5• Total no. of Securities: 3000000• Paid-up Capital: 3000 millions BDT (The bank issued 3 million bonds of Tk. 1,000 each worth Tk. 3000 million)• Credit Rating: A+ by Credit Rating Information and Services Limited (CRISL)• Trustee: Investment Corporation of Bangladesh (ICB)• Issue Manager: ICB Capital Management Limited (A subsidiary company of ICB)
    • IBBL MUDARABA PERPETUAL BONDFEATURES• This bond is issued to raise the fund to meet the capital adequacy ratio of the Islami Bank Bangladesh Ltd.• It has no redemption facility & pre-determined interest rates.• It doesnt have any maturity period.• The Minimum subscription amount is Tk. 5,000 or multiple of Tk. 5,000.• 100% public share, which means Government or any institute doesnt have any of its share.
    • IBBL MUDARABA PERPETUAL BONDFINANCIAL PERFORMANCE Year Profit rate (Coupon rate) 2011 -------------- 13.20% 2010 -------------- 12.35% 2009 -------------- 12.35% 2008 -------------- 13.80% 2007 -------------- 12.64%
    • IBBL MUDARABA PERPETUAL BONDMARKET PRICELast 1 year (March 2012 - Feb 2013): Highest: 1020 and Lowest: 890 BDT
    • IBBL MUDARABA PERPETUAL BONDMARKET PRICELast 1 month (Jan 13 2013 - Feb 11 2013): Highest: 1002.5 and Lowest: 995.75 BDT
    • IBBL MUDARABA PERPETUAL BONDNUMBER OF TRADESLast 1 year (March 2012 - Feb 2013): Highest: 502and Lowest: 0
    • IBBL MUDARABA PERPETUAL BONDNUMBER OF TRADESLast 1 month (Jan 13 2013 - Feb 11 2013): Highest: 81 and Lowest: 7
    • IBBL MUDARABA PERPETUAL BONDPROS & CONSPositives:• It has maintained good profit (coupon) rate for the last 5+ years.• This Bond doesnt provide constant profit rate according to Islamic Banking Policy, which may attract Muslim people to invest on this bond.• A+ credit rating indicates IBBLs strength in paying back the periodic interest (coupon) to the bond holder.Drawbacks:• It doesnt have any redemption facility, which means it cannot be redeemed for its face value.• As there is no fixed interest rate, so investors who want regular interest/profit/dividend/return for their regular income may not be interested to invest in this bond.
    • ACI 20% CONVERTIBLE ZERO COUPON BOND (ACIZCBOND)
    • ACI 20% CONV. ZERO COUPON BOND• Zero Coupon Bond, which means it doesnt give any periodic interest (coupon) payments to the investor, rather it is sold at a deep discount from its face value.• 20% Convertible bond, which means the bond holder (investor) have the option of redeeming the entire face value of the bond in cash upon maturity or can redeem 80% in cash and convert 20% of the bond value in the common stock of Advanced Chemical Industries Limited (ACI).BASIC INFORMATION• Listed in Stock Exchange: 2010• Market Category: A• Face Value: 1000.0• Market Lot: 3• Total no. of Securities: 801510• Paid-up Capital: 802 millions BDT (The company issued 801510 bonds of Tk. 1,000 each worth 802 millions TK)• Credit Rating: rated as A by Credit Rating Information and Services Limited (CRISL)• Trustee: Industrial & Infrastructure Development Finance Co. Ltd (IIDFC)• Issue Manager: Alliance Financial Services Limited (AFSL)
    • ACI 20% CONV. ZERO COUPON BONDFEATURES• This bond is issued as a source of alternative funding arrangement of Advanced Chemical Industries Limited (ACI).• Zero coupon, so it doesnt give any periodic interest to the bond holders.• Upon maturity, this bond can be redeemed as the entire face value in cash or can be redeemed as 80% cash and remaining 20% converted in the common stock of ACI.• Maturity periods ranging from 1 to 3 years• 3 bonds will be bundled together to make a lot having 3 different maturity periods ranging from 1 to 3 years; which means at the end of each year, one bond from a lot will mature.• 40% public share and the remaining 60% owned by financial institute.• Tax exemption: The redemption income (the difference between issue price and the face value) to the bondholders is fully tax free except banks, insurance and financial institutions.
    • ACI 20% CONV. ZERO COUPON BONDMARKET PRICELast 1 year (March 2012 - Feb 2013): Highest: 1020and Lowest: 890 BDTEffective rate of return (discount rate): 10.5% pa excluding tax exemptionbenefits and capital gain from bond to common stock conversion.
    • ACI 20% CONV. ZERO COUPON BONDMARKET PRICELast 1 year (March 2012 - Feb 2013): Highest: 842 and Lowest: 750 BDT
    • ACI 20% CONV. ZERO COUPON BONDMARKET PRICELast 1 month (Jan 13 2013 - Feb 11 2013): Highest: 842 and Lowest: 821 BDT
    • ACI 20% CONV. ZERO COUPON BONDNUMBER OF TRADESLast 1 year (Mar 2012 - Feb 2013): Highest: 641 and Lowest: 0
    • ACI 20% CONV. ZERO COUPON BONDNUMBER OF TRADESLast 1 month (Jan 13 2013 - Feb 11 2013): Highest: 66 and Lowest: 3
    • ACI 20% CONV. ZERO COUPON BONDPROS & CONSPositives:• The tax free benefits of redemption income to all investors except bank, insurance and financial institutions.• Convertibility option allows the investor (bond holders) to redeem their bond as the common stock of ACI and enjoy significant capital gain.• 10.5% pa effective rate of return earned through redemption income upon maturity of the bond.Drawbacks:• No periodic interest / coupon• Lack of awareness of investors about the bond’s features and also about the bond market.
    • PREFERRED STOCK in BANGLADESH
    • WHAT IS PREFERRED STOCK• Capital stock which provides a specific dividend that is paid before any dividends are paid to common stock holders, and which takes precedence over common stock in the event of liquidation.• In general, there are four different types of preferred stock: 1. Cumulative preferred stock 2. Non-cumulative preferred stock 3. Participating preferred stock 4. Convertible preferred stock
    • CHARACTERISTICS OF PREFERREDSTOCK• Preferred stock is given preference over common stock• Holders of preferred stock receive dividends at a fixed annual rate• The earnings of a corporation are applied to this payment before common stockholders receive dividends• If corporate earnings are insufficient for the fixed annual dividend, the preferred stock will absorb the total amount of earnings, and the common stockholders will be precluded from receiving a dividend• Preferred stock can be cumulative or noncumulative. If it is cumulative and if the fixed dividend remains unpaid, it becomes a debit upon the surplus earnings of succeeding years. Accumulated dividends must be paid in full before common stockholders can receive dividends
    • PREFERRED STOCK IN BANGLADESHPreferred stocks Issued by firms listed in Dhaka StockExchange: • Summit Power • Beximco Pharmaceuticals • Aftab Automobiles • Peoples Leasing and Financing Limited • RN Spinning Mills
    • THANK YOU PRESENTED BY Ferdous Mahmud Shaon