Meghna Bank Issuing Tk 400 Crore Bond to Strengthen Tier-2 Capital

Meghna Bank is issuing its second subordinated bond worth Tk 400 crore to strengthen its capital base and achieve business growth. The two regulators, Bangladesh Bank and the Bangladesh Securities and Exchange Commission (BSEC), have already approved the bond.

The funds raised through the seven-year bond will be used to strengthen the bank's Tier-2 capital. The bank expects this to strengthen its lending and investment activities and increase its financial capacity, Meghna Bank said in a press release.

The release said that in the current competitive banking environment, preserving adequate capital, managing risk and complying with regulators' instructions are important for banks. The second subordinated bond initiative was taken in this context, through which capital adequacy will be maintained and opportunities for sustainable business growth created.

The bank said the financing will also contribute to industrialisation, investment in productive sectors, the creation of new entrepreneurs and the expansion of existing businesses, with the possibility of creating new employment.

The bond's coupon rate is variable. Its reference rate is determined on the basis of the average of the highest interest rates on commercial banks' six-month fixed deposits, with a 3 percent margin added to set the coupon rate. As of September 30, the bond's coupon rate was 12.05 percent per annum, comprising a reference rate of 9.05 percent and a margin of 3 percent. The coupon rate will change in future if the reference rate changes.

Meghna Bank said the bond's face value is Tk 5 lakh per unit. Eligible individual and institutional investors will be able to invest in the bond, issued through private placement, in accordance with applicable laws and conditions.

The release said there is a plan to list the bond on the main board of the Dhaka Stock Exchange (DSE). Listing will allow investors to buy and sell the bond on the stock exchange, which could increase investment liquidity and expand the field of alternative investment in the country's capital market.

Under the applicable income tax law, individual investors will be able to get tax rebates against investment in the bond because of the listing. The bond also carries no excise duty. While some investments such as DPS and general savings certificates have set limits, this bond has no separate maximum investment limit.

Meghna Bank said there is a possibility of earning higher returns from this bond compared with conventional savings certificates, fixed deposits (FDR) and DPS. As of September 30, its annual coupon rate was 12.05 percent, which is 3 percent higher than current term deposits.

Investors in the bond will receive coupon income every six months. Repayment of the principal will begin after the end of the third year, with 20 percent of the principal investment repaid each year over the last five years.

Overall, Meghna Bank's second subordinated bond is creating an alternative investment opportunity for investors, and the initiative can also play a role in the development of the country's corporate bond market, the release said.