A $19 million taka-denominated bond is set to make its debut on the London Stock Exchange tomorrow, in a landmark moment for the country.
The debt certificate—the Bangla Bond—is being backed by the International Finance Corporation (IFC), the private sector arm of the World Bank Group.
Finance Minister AHM Mustafa Kamal is expected to ring in the ceremonial trading bell, according to a senior official of the finance ministry.
Following the ceremony, an investors’ roundtable will be held to showcase Bangladesh’s growth story and investment opportunities.
The government expects to draw $1 billion from the Bangla Bond, with the rest of the amount to be floated in phases.
The floatation of the bond comes as the government looks to mobilise the hordes of expatriate Bangladeshis towards nation building and draw in foreign investors too.
Kamal will be accompanied by Salman F Rahman, prime minister’s adviser for private industry and investment, and Monowar Ahmed, secretary of the Economic Relations Division, at the event.
The IFC has been working with the government for four years for the Bangla bond.
A successful implementation of the bond issuance will signal the confidence offshore investors have in the stability of the Bangladesh economy and the taka, the IFC said in its proposal in April 2015.
Positive investor and media responses to an inaugural IFC issuance could potentially catalyse further investments and dollar inflows into Bangladesh.
Many investors tend to invest in AA-rated bonds and stay away from Baa3/BBB-/BB+ rated Bangladesh government bonds even if they wish to gain exposure to the taka.
These investors will, however, be able to invest in IFC’s AAA-rated bonds, the IFC said, adding that sovereign wealth funds and foreign central banks are likely to be attracted to the taka-linked bonds.
While initial feedback from investors has signalled appetite for shorter tenures (2-5 years), the IFC’s intent is to build a longer yield curve over time.
Proceeds from longer tenure bonds could be utilised in infrastructure projects within Bangladesh, it said.
By establishing the programme, the IFC can provide a successful benchmark for other issuers from Bangladesh, who could then access the offshore investor base.
Potential exists for such issuers to be able to source funding for longer tenures and larger sizes (given the more diversified investor base) than would be possible in the domestic capital markets, the IFC said. The primary objective of the bond issuance is to mobilise capital to fund IFC investments in projects in the country.
This will be done by converting the dollar proceeds of the bonds into taka and then using the resulting taka funds to provide financing for projects in Bangladesh.