ACI to raise Tk 130cr in bonds

Advanced Chemical Industries (ACI) Limited has decided to borrow Tk 130 crore through issuing convertible zero coupon bonds for loan repayment and fresh investment.

The decision came at the company's Board of Directors meeting on Thursday.

A zero coupon bond is a bond bought at a price lower than its face value, but at the time of maturity the repayment will be an amount that the face value actually means. And convertible zero coupon bond means that it is convertible into a company's common stock or share.

The issuance of the bond 'ACI 20% Convertible Zero Coupon Bond', first of its kind, is however subject to the approval of Securities and Exchange Commission, the company officials said.

“The prime object of issuing the zero coupon bond is to repay the loan provided by the existing financiers,” said Muallem A Choudhury, executive director (finance and planning) of ACI.

“The rest of the borrowed money, if there is any, will be injected to the company's business as fresh investment,” he added.

Maturity period of the bond is five years with yearly redemption. It means 20 percent value of the bond will be repaid to the investors in each year with a 10.5 percent discount rate.

Of the yearly repaying amount, 20 percent will be converted into ACI shares.

Along with the discount or interest, the investors, excluding banks and insurance companies, will also get tax exemption on the income from the zero coupon bond.

The bond will be traded in Dhaka and Chittagong stock exchanges, which is also subject to the approval of the authorities.

The trading of the debt instrument will help the capital market in activating the bond market, as the existing one is almost inactive.

The bond will be issued through both private placement and initial public offering. Alliance Financial Services Ltd is the issue manager of the bond, while Industrial and Infrastructure Development Finance Co Ltd is the facility manager.

ACI, which has investments in pharmaceuticals, consumer brands and commodity products, agribusinesses, crop care and public health, livestock and fisheries, fertiliser and seeds business, posted net profits of Tk 36.25 crore in 2007. The company posted net profits of Tk 17.18 crore as of June 30.

The ACI subsidiaries include ACI Formulations Limited, Apex Leathercrafts Limited, ACI Salt Limited, ACI Pure Flour Limited, ACI Foods Limited, Consolidated Chemicals Limited, Premiaflex Plastics Limited, Creative Communications Limited, ACI Motors Limited and ACI Logistics Limited.