Commercial Paper becoming popular due to low cost, easy access

After Nasir Glass, Prime Bank Ltd is going to act as arranger and issuing agent for raising fund through Commercial Paper worth Tk 1.10 billion (110 crore) in favour of Bay Development Ltd.

The amount will be raised in two tranches for Tk 550 million each. The issue will also be rated by credit rating agency, a source in Bay Development Ltd told The FE Monday.
"We have a deal of secured Commercial Paper and Information Memorandum will be circulated in the first week of next month (May)," the source disclosed.
In Bangladesh, at least 5 (five) companies have so far raised Tk 3.50 billion through seven commercial papers since its introduction in October 2014. After arranging fund for Bay Development Ltd, it will cross Tk 5.60 billion.

Recently Prime Bank was mandated as Arranger & Issuing Agent of Commercial Paper,  the first of its kind, rated by credit rating agency in favour of  Nasir Glass Industries Limited (a concern of Nasir Group of Industries). It is the first rated Commercial Paper in Bangladesh.
Nasir Glass, the leading float glass manufacturing company in Bangladesh is the issuer of this secured commercial paper of BDT 1000 million.
CP is issued for maturities between a minimum of 7 days and a maximum of upto one year from the date of issue. The maturity date of the CP shall not go beyond the date up to which the credit rating of the issuer is valid. In this deal, the rating of issuer company (i.e. Nasir Glass Industries) for Long Term is AA + and for Short Term is ST-1.
Nasir Glass Industries will use this fund for utilising the alternative sources of short-term financing and fulfill the working capital requirements and re-finance of short-term liabilities.

Commercial Paper, a new money market instrument is becoming popular among companies owing to its low cost and easy access, insiders in the corporate segment said.
As per definition, Commercial Paper (CP) is an unsecured money market instrument issued in the form of Promissory Note. CP, as a privately placed instrument was introduced in India in 1990 with a view to enable highly rated corporate borrowers to diversify their sources of short-term borrowings and to provide an additional instrument to investors.  Banks and Financial Institutions may, based on their commercial judgment, subject to the prudential norms as applicable to them, with the specific approval of their respective Boards, choose to provide stand-by assistance/credit, back-stop facility etc. by way of credit enhancement for a CP issue.
 "Prime Bank is always the trendsetter in syndication market in Bangladesh. Prime Bank started its journey in loan syndication market by successfully concluding its first syndication deal as the lead arranger in the year 1999 as the pioneer in private commercial banks. Keeping their role as a pathfinder in loan syndication market, the bank has established a remarkable landmark in banking arena by arranging and providing deserving agency functions to a good number of deals for large as well as medium sized projects, said Md. Touhidul Alam Khan, Deputy Managing Director and Chief Business Officer of Prime Bank who has significant contribution to popularize syndication financing in Bangladesh among local banks as Lead Arranger .
"This commercial paper deal is another 'feather in the cap' for Prime Bank and we have innovative ideas to do more tailor-made products to change the game when we need to meet the need of our customers," Mr Touhidul Alam Khan who also led the first shariah-based syndication deal and first biggest syndicated term loans deal in Bangladesh under lead arrangement of Prime Bank said.
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