Investment Corporation of Bangladesh (ICB) has been made trustee for the special purpose vehicle which will issue Tk 35.9 crore worth zero coupon bonds against debt receivables of IPDC.

Dhaka Bank, Jamuna Bank, Mutual Trust Bank, Southeast Bank and International Leasing and Financial Services Ltd will invest in the Tk 35.9 crore IPDC asset-backed securitised bonds in private placement arrangement. IPDC also plans to introduce similar instruments through initial public offering to be traded in secondary market.

The launch of the debt instrument was announced at a function in Dhaka yesterday. Finance and Planning Minister M Saifur Rahman, Bangladesh Bank (BB) Governor Fakhruddin Ahmed, Securities and Exchange Commission (SEC) Chairman Mirza Azizul Islam and National Board of Revenue (NBR) Chairman Khairuzzaman Chowdhury attended the function.

The move will obviate the dependency of IPDC on costly bank funds and provide it with funds at low cost. ICB being the trustee will handle the transaction by receiving the payments and forwarding these to IPDC as per agreements after certain time period.

With the income tax rate fixed at 10 percent on these types of schemes, investors as a whole will be benefited with guaranteed return. The issue of securitised bonds is first of its kind by the private sector in Bangladesh following massive rate cut on different government savings instruments during the past few years. The move, experts say, will pave the way for a secondary bond market.

The Financial Institutions Development Project of Bangladesh Bank started the initiative to develop this debt instrument to enable financial institutions to mobilise funds against credit receivables in 2000 under a World Bank assistance.

Fund raising through securitisation is a common practice in developed economy as well as in some neighbouring countries. Securitisation of assets such as mortgage debt, leases, loans, credit card balances has often been used to build large infrastructure. Securitisation of assets offers scope to raise long-term funds and contribute to develop a mature financial market.

BB, SEC and NBR have to settle a number of crucial issues to facilitate the launch of securitised bond. The stamp duty and registration fees for transfer of assets to the special purpose vehicle have been substantially lowered to cut cost of issuance of the instrument.

NBR has cut down rate of tax on return on investments for the instrument while SEC has introduced a set of rules to control issuance of such instruments and trading the same in secondary market.

This type of instrument can contribute to building large infrastructure like Padma Bridge. Bahrain International Airport and Madurai Bridge in Madras have been built in recent years through securitisation of future receivables.

Chairman of IPDC and Industries Secretary Ayub Quadri, Chairman of ICB Hasinur Rahman, Director (Financial Institution Development Project) of BB Ziaul Hasan Siddique, Managing Director of IPDC CM Alam and managing directors of the investor banks were present at the function.