Eastern Bank Limited (EBL) and Summit Group have fixed an interest rate SWAP derivative deal worth $71.25 million for two power plant projects.
They are: Barisal Power Limited and Summit Narayanganj Power Unit II Limited.
The rate was fixed at a ceremony held at EBL head office in Dhaka's Gulshan area on Monday.
Speaking on the occasion, Managing Director & CEO of EBL Mr Ali Reza Iftekhar said this interest rate SWAP deal between EBL and Summit Group is first of its kind executed by a private commercial bank in Bangladesh.
Interest rate SWAP works as insurance to protect the buyer from adverse price movement.
Interest rate SWAP enables corporate entities to arrest cost of long-term financing cost against market volatility, the CEO of the EBL said.
This landmark deal opens up the possibility for EBL to provide hedging facility to Bangladeshi enterprise to manage their price risk, Iftekhar said
Interest rate Swap is becoming increasingly popular among all major global producers and traders on back of growing volatility in the market, he added.
Managing Director of Summit Power Limited Lt. General (retd) Abdul Wadud said: "This is a unique job. I appreciate all to make the deal successful and to give valuable efforts."
These two power plants of Summit Group were financed by External Commercial Borrowing, with USD 3 Months LIBOR rate.
Since USD 3 Months LIBOR is floating in nature and is exposed to market risk, EBL has structured an interest rate SWAP transaction to hedge the market risk.
The deal will help Summit protection against adverse upward price movement of USD 3 Months LIBOR, which might adversely increase the cost of financing of the project.
With the recent hike in USD LIBOR rates, this deal has enabled these two power plants to have better visibility in their cost of long-term financing.
EBL Additional Managing Director Hassan O. Rashid and Deputy Managing Director Ahmed Shaheen, were present on the occasion.
Director of Summit Corporation Limited Azeeza Aziz Khan and Executive Director of Summit Corporation Limited Syed AK Rahat Jaman also attended the function.
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