Criteria for forex debenture issuance set
KATHMANDU, SEP 14 -
Given the Nepal Rastra Bank (NRB) already opening door for issuance of debentures in foreign exchange through the monetary policy, it has now fixed the criteria for issuance of such instruments.
Himal Power Limited (HPL), owner and operator of the country’s first private hydropower project—60MW Khimti, has announced its plan to raise $60 million from the Nepali financial market by issuing foreign currency debentures. HPL has already initiated the process in this regard by appointing Ace Development Bank as issuance manager.
The central bank has only allowed companies related to the power sector, including power developers and those involved in expanding transmission lines. They can issue such instruments for a certain project through A and B class banks and financial institutions (BFIs) that are licensed for merchant banking operations.
However, the central bank directive has made it clear that such debentures could be issued for projects that generates foreign exchange and is capable of paying principal and interest in foreign currency. “Such instruments can be issued for certain projects and only 60 percent of the project cost can be raised,” states the NRB directive.
The company issuing such debentures will have to create ‘Debenture Payment Fund’ to pay principal and interest from the year of operation of the project. Then, the company should deposit the amount in the fund from each year’s profits on proportional basis to complete the payment within a certain period.
The company concerned has to use the deposited foreign currency amount only for the approved purpose and for the payment of debt that was spent in the same project.
A and B class BFIs can invest up to 40 percent of total foreign exchange deposits after conforming that it would not affect their liability management. If other institutions and individuals invest such debentures, they can make the investment through their currency accounts. At least $1,000 or its multiple can be invested in such instruments, according to the NRB directives. These debentures can be transacted in both primary and secondary markets. Individuals can sell the instrument to A and B class BFIs.
Ace CEO Siddhanta Raj Pandey said the bank would now apply to the Securities Board of Nepal for permission to issue HPL’s debenture.
Source: Kantipur
Given the Nepal Rastra Bank (NRB) already opening door for issuance of debentures in foreign exchange through the monetary policy, it has now fixed the criteria for issuance of such instruments.
Himal Power Limited (HPL), owner and operator of the country’s first private hydropower project—60MW Khimti, has announced its plan to raise $60 million from the Nepali financial market by issuing foreign currency debentures. HPL has already initiated the process in this regard by appointing Ace Development Bank as issuance manager.
The central bank has only allowed companies related to the power sector, including power developers and those involved in expanding transmission lines. They can issue such instruments for a certain project through A and B class banks and financial institutions (BFIs) that are licensed for merchant banking operations.
However, the central bank directive has made it clear that such debentures could be issued for projects that generates foreign exchange and is capable of paying principal and interest in foreign currency. “Such instruments can be issued for certain projects and only 60 percent of the project cost can be raised,” states the NRB directive.
The company issuing such debentures will have to create ‘Debenture Payment Fund’ to pay principal and interest from the year of operation of the project. Then, the company should deposit the amount in the fund from each year’s profits on proportional basis to complete the payment within a certain period.
The company concerned has to use the deposited foreign currency amount only for the approved purpose and for the payment of debt that was spent in the same project.
A and B class BFIs can invest up to 40 percent of total foreign exchange deposits after conforming that it would not affect their liability management. If other institutions and individuals invest such debentures, they can make the investment through their currency accounts. At least $1,000 or its multiple can be invested in such instruments, according to the NRB directives. These debentures can be transacted in both primary and secondary markets. Individuals can sell the instrument to A and B class BFIs.
Ace CEO Siddhanta Raj Pandey said the bank would now apply to the Securities Board of Nepal for permission to issue HPL’s debenture.
Source: Kantipur
