Bank Alfalah Limited (BAFL) has announced to launch the Initial Public Offering (IPO) for its 5th Rated, Unsecured, Subordinated and Listed Term Finance Certificates (TFCs) worth Rs 1.25 billion in order to raise subordinated debt. The proceeds of the TFC issue will be eligible for BAFL's Tier II Supplementary Capital as per guidelines set by the State Bank of Pakistan.
While, briefing the investors regarding IPO of TFCs at Karachi Stock Exchange Chief Executive Officer of Bank Alfalah Atif Bajwa said that the increase in Tier-II capital will improve bank's Capital Adequacy Ration (CAR) and thereby allow bank to further expand its asset base.
He said that overall some Rs 5 billion worth TFCs is being issued by the bank and this comprises Private Placement (Pre-IPO) of Rs 3.75 billion and IPO of Rs 1.25 billion. "Pre-IPOs have already been subscribed, while public subscription under IPO will be held on February 19 and 20, 2013 (both days inclusive) during banking hours", he mentioned.
The TFCs will be offered to the general public in sets of 16 scrips (TFCs) with an accompanying "certificate of Holding of Term Finance Certificates: each set having an aggregate face value of Rs 5,000 or in multiple.
Bajwa said that the IPO for Bank Alfalah's 5th TFC is yet another step by the bank to facilitate and broaden the development of debt capital markets in Pakistan. Given the encouraging response the bank received during the Pre-IPO phase, he said, "we are optimistic that potential investors will demonstrate similar interest towards the IPO as Pre-IPO was oversubscribed".
The bank aims to continue to introduce debt based instruments such as this TFC in order to continue diversifying the investor base and to create market instruments that have their own value, he said and added that a well-developed and vibrant corporate debt market plays a pivotal role in the economic development of a country. "We have been actively working together with all stakeholders to identify and implement specific measures required to further develop the domestic debt markets with an objective to provide more opportunities for retail savers, institutional investors, and debt issuers", he mentioned.
Bank Alfalah has remained one of the strongest, largest and most frequent issuers in the domestic debt capital market, Bajwa said. Talking about the bank's performance, he said that Advance to Deposit Ration (ADR) of the whole banking industry is declining; however Bank Alfalah ADR is on rise. "Bank Alfalah is the sixth largest bank by assets, which stood about Rs 500 billion, while within conventional banking industry, it's the largest Islamic bank", he mentioned.
Bajwa said that the decision by Bank Alfalah to list their TFC on the Karachi Stock Exchange shows their commitment to the development of this under-utilised segment of our capital markets. The appointment of a market-maker for this instrument will not only ensure liquidity in the market but would also help provide a benchmark for corporate instruments of comparable credit quality, he added.
Head of treasury Bank Alfalah Ali Sultan informed that Arif Habib securities is the listing agent of the IPO, while UBL, bank Al Habib Limited and Faysal Bank Limited are the underwriters. He said that these TFCs are 8 years floating rate instrument is being offered at 6 months Karachi InterBank Offer Rate (KIBOR) plus 1.25 percent p.a without any floor or cap. Sulatn informed that Pre-IPO worth Rs 3.75 billion has already completed as on December 28, 2012 and now on February 19-20 has been fixed for public offering. "The instrument has received a credit rating of "AA-" (Double A Minus) by PACRA", he informed.
He said that Bank Alfalah continues to operate through a network of 471 branches across 163 cities in Pakistan in order to provide consumers, corporations, institutions and governments with a broad spectrum of financial products and services, including corporate and investment banking, consumer banking and credit, securities brokerage, commercial, agricultural, Islamic and asset financing. On the occasion Arif Habib, Shahid Ali Habib and Managing Director of the Karachi Stock Exchange Nadeem Naqvi and others were also present.