Premier Cement plans to raise money to repay expensive loans

To raise the funds, it has offered 322 fully redeemable, non-convertible, non-participating cumulative shares at a par value or issue price of Tk50 lakh each, with a term of five years, according to a stock exchange filing on Thursday.

Premier Cement Mills, one of the country’s largest cement makers, has decided to raise up to Tk 161 million by issuing preference shares to repay its expensive loans against the backdrop of rising bank interest rates.

To raise the funds, it has offered 322 fully redeemable, non-convertible, non-participating cumulative shares at a par value or issue price of Tk50 lakh each, with a term of five years, according to a stock exchange filing on Thursday.

Preferred stock is a type of company stock with dividends paid out to shareholders before common stock dividends. In the event of bankruptcy, preferred shareholders are entitled to payment from the company’s assets, before common shareholders.

According to the disclosure, “the investors and the company may choose to revise the dividend rate at the end of the 12th, 30th and 42nd months, depending on the then existing market conditions, based on the average interest on deposits of more than six months and less than a year for commercial banks, with a range of 1.50%.”

Dividends are paid out semi-annually in arrears.

The issuance of preference shares and dividend payments are subject to the approval of the Bangladesh Securities and Exchange Commission (BSEC), the disclosure said.

Eligible investors include local commercial banks (excluding 100% Sharia-based banks), corporations, non-bank financial institutions (NBFIs), high net worth individuals, including corporate sponsors and directors, and other institutional investors.

According to sources, interest rates on loans have risen to over 14%, prompting the company to repay some of its short-term bank debt.

Kazi Md Shafiqur Rahman, corporate secretary of Premier Cement Mills, told The Business Standard: “Interest on bank loans has increased significantly. Therefore, the company will issue preference shares.”

“The company has both local and foreign loans at different interest rates. Now interest rates from local banks are more than 13%. If some of the existing loans are repaid, interest payments will decrease,” he added.

This is evident from the annual budget report 2023-24The company has Tk479 crore in long-term loans and Tk1,617 crore in short-term loans. As of June 2023, short-term borrowings stood at Tk1,352 crore.

It paid Tk159 crore in loan interest for FY24, a significant increase from Tk55 crore in FY23.

Earlier, Premier Cement Mills offered 1,243 preference shares with a face value of Tk25 lakh each to raise Tk310 crore for repaying its high-interest loans and improving its financial indicators.

However, according to Kazi Md Shafiqur Rahman, it could only raise Tk151 crore. The dividend percentage for the preference shares varies from 6.25% to 7.75%.