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Tuesday, June 18, 2024

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BEXIMCO’s Sukuk: Bangladesh’s first-ever green Sukuk

Multinational conglomerate Bangladesh Export Import Company (BEXIMCO) has issued the country’s first-ever green Sukuk through its SPV Beximco Green-Sukuk Trust, raising a total of BDT28.22 billion (US$323.77 million) through a combination of private and public offers. NESSREEN TAMANO has the details.

The five-year Sukuk offering, with an initial issue size BDT30 billion (US$344.19 million), was divided into BDT22.5 billion (US$258.15 million) for private placement and BDT7.5 billion (US$86.05 million) for public offer.

The private offer closed at full subscription from general investors and existing shareholders of BEXIMCO, while the public offer closed on the 30th September 2021 with bids from the public at BDT4.22 billion (US$48.42 million) and from underwriting at BDT1.5 billion (US$17.21 million), totaling BDT5.72 billion (US$65.63 million) or 76% of the public offer.

The Islamic paper holds a base rate of 9%, and carries a sinking fund provision of 10% of the outstanding amount of the Sukuk to be maintained in the SPV account, in addition to a conversion option of up to 20% each year to BEXIMCO shares with a 25% discount of the average share price of the last 20 days. There is also a Takaful coverage where the SPV is a co-insurer in the event of total loss.

Proceeds from the Sukuk issuance will be used by BEXIMCO for the construction of two solar power plants, Teesta Project and Korotoa Project, and to finance and refinance the expansion requirements of the company’s textile division.

“We wanted an environment-friendly issuance for quite some time and the BEXIMCO Sukuk was an ideal option for us. The solar projects and the environment-friendly, energy-efficient textile machinery (of BEXIMCO) met the green guidelines of the Bangladesh Securities and Exchange Commission (BSEC),” Ershad Hossain, CEO of the issue manager City Bank Capital, told IFN.

“We faced a lot of headwinds as the first-ever green Sukuk issuance in Bangladesh. I must say the BSEC was extremely supportive. We got some exception waiver on the Debt Securities Rules (2021) and most importantly, we pushed for tax exemptions for Sukuk transactions with the National Board of Revenue (NBR),” Ershad added.

Despite regulatory support however, the public offer of the Sukuk had to be extended twice: first to the 6th September 2021 from its original closing date of 23rd August, and another time to the 30th September, after a low initial response from investors, leading to local media reports that the public offer may be canceled.

“As per the BSEC, any IPO stands canceled if more than 50% of the public offer is undersubscribed. The BEXIMCO Sukuk public offer is 25% of the total issue, the first time such a big issue is up for public offer. If the public offer is canceled or undersubscribed, the remaining portion can be raised through private offer and can be listed,” Ershad had explained to IFN.

Still, the completion of Bangladesh’s first-ever green Sukuk remains a notable milestone in the country’s Islamic capital market, which saw its debut sovereign Sukuk in December 2020 and its first corporate Sukuk earlier this year by Deshbandhu Group.

Following the BEXIMCO Sukuk issuance, the NBR waived the tax deducted at source on Sukuk transactions between Sukuk originators and SPVs which, along with the BSEC’s September issuance of a directive outlining the effective governance of trustees of debt securities and Islamic securities including Sukuk, could result in the strengthening of the country’s Islamic capital market.

28.22 billion (US$323.77 million)

30th September 2021
IssuerBeximco Green Sukuk-Trust
OriginatorBangladesh Export Import Company (BEXIMCO)
StructureSukuk Istisnah Ijarah
TenorFive years
Profit rateBase rate (9% per annum) + profit margin rate (10% of difference between base rate and annual dividend rate declared in BEXIMCO’s annual general meeting of preceding year
Payment termsSemi-annual
Lead issue managerCity Bank Capital Resources
Legal advisorJamali & Morshed
CurrencyBangladeshi taka
Governing lawBangladeshi law
Investor breakdownAll individual and institutional investors including non-resident Bangladeshi and foreign investors
ListingDhaka Stock Exchange; Chittagong Stock Exchange
Rating‘A’ by Emerging Credit Rating
Shariah advisorsDr Md Anwar Hosain Molla; Mawlana Shah Mohammad Wali Ullah; Dr Md Mahabbat Hossain; Md Fariduddin Ahmed; Prof Dr Muhammad Yousuf Ibn Hossain; Mezbah Uddin Ahmed; Abul Quassem Md Saifullah

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