BRAC Bank issues Tk700 crore subordinated bond

BRAC Bank has launched a subordinated bond worth Tk700 crore to enhance its Tier II Capital base, now available for subscription by investors. 

The bond will support its capital adequacy requirements as the bank has earned significant balance sheet growth in recent years, BRAC Bank said in a statement on Wednesday (21 February). 

Any individual or institution can invest in the bond with a minimum investment threshold of Tk10 lakh. 

"This is a safe and secured investment option for people, as it is issued by one of the strongest banks in the country having the highest credit rating from local and international rating agencies. The subscribers will be entitled to a sizable return as it offers a very attractive return. Moreover, they will benefit from a reduced advance income tax (AIT) at 5% on interest income and no excise duty," reads the statement. 

This seven-year tenor non-convertible, unsecured, fully redeemable, coupon-bearing, floating rate-based bond has already been approved by the Securities and Exchange Commission and Bangladesh Bank, it added. 

BRAC EPL Investments Limited is acting as the lead arranger and UCB Investment Limited as the trustee.

The coupon interest rate on the bond has been fixed as "Reference rate (Industry average of highest FDR rates) + 3% Margin". Coupon rate will be reset half yearly based on the latest reference rate. 

"As of December 2023, coupon rate comes to 10.97%, an attractive return compared to other investment options currently available in the market. The repayment of the principal amount will start from the 3rd year that will cover 20% each year, and subscribers will be entitled to receive their coupon interest half-yearly," said the statement. 

Commenting on the investment scope of the bond, Selim RF Hussain, managing director & CEO of BRAC Bank, said, "The minimum ticket size has been kept as low as Tk10 lakh to provide investment opportunity to all, particularly to small investors and micro savers. 

"We are offering a 3% higher interest rate on bond than the average FDR rate in the industry that will be exciting to the subscribers. The 20% principal repayment from 3rd year and six monthly coupon interest payments will also be lucrative to them."