NEA debentures to be redeemed

KATHMANDU, MAR 29:

NMB Capital — issue manager for Nepal Electricity Authority (NEA)’s debentures — has called bond holders for redemption of the debentures issued five years ago.

NEA had issued 15,000 units of corporate debentures — Nepal Bidhut Pradhikaran Rinpatra 2069 — in 2008. The tenure of the debentures will be up by mid-April. The five-year bond, worth Rs 1.5 billion, was listed at Nepse in June 2008, which can now be redeemed from NMB Capital.

NMB Bank had managed the debenture issue in 2008 and is appointed its trustee. The debenture, worth Rs 1000 per unit, offered 7.75 per cent fixed interest, paid on a half-yearly basis. NMB Capital has asked debenture holders to bring the original bond certificates and citizenship certificates when they come to redeem the lent amount and outstanding interests from Sunday.

“At the time, the coupon rate offered by the debenture was attractive so the issue was well received by the public,” said deputy managing director of NEA Lawa Ghimire. “NEA had raised money from the bond to finance Madhya Marsyangdi and Chameliya hydro projects. However, at the current tariff rates, it is not profitable for NEA to issue power bonds and purchase electricity,” he added. Though NEA’s debentures were listed at Nepse for secondary trading, they never saw the trading floor in the last five years.

In the secondary market, at present, there are 13 debentures belonging to 10 companies — nine of these are of commercial banks and one of NEA but none of these bonds are ever traded. The listed corporate debentures amount to Rs 4.97 billion. In addition to corporate debentures, there are government bonds worth Rs 22.4 billion in the secondary market which also never get traded.

However, the emergence of more mutual funds is expected to revive the secondary bond market as well. The recently launched Nabil Balanced Fund I has estimated to contain almost 30 per cent of its portfolio in fixed income securities like bonds and debentures. Likewise, Siddhartha Capital’s second mutual fund offering that will be launched later in the year is also planning to contain bonds along with equities in its portfolio.

Moreover, commercial banks are opting to issue debentures to expand lending capacity and capital market is expected to see more debentures being listed. Recently, Nepal SBI Bank and Laxmi Bank issued debentures. Siddhartha Bank will also issue bonds worth Rs 500 million at eight per cent coupon rate next week.

Source: THT