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Yet another securitisation of loans is in the offing with a leading leasing company - IDLC - taking advantage of the newly emerged debt instrument, sources said.
"All ground works have almost been completed …Hopefully, the IDLC (Industrial Development and Leasing Company) will formally launch its securitisation within the next one week," an official told the FE.
The proposal for securitisation of the company's receivable loans is now awaiting the central bank's approval, he said, adding the Securities and Exchange Commission (SEC) has already given permission to this effect.
An IDLC executive, however, hinted that the company has proposed securitising its receivable loans worth nearly Tk 220 million.
It will be a second such securitisation after another leasing company - the Industrial Promotion and Development Company of Bangladesh (IPDC) - recently launched a Tk 359 million securitised bond.
Like the previous one, the proposed securitisation is also taking place on a placement basis with three commercial banks and two other insurance companies participating in the process, he said.
A central bank official said the emergence of the debt instrument has created new options for the individual financial institutions and banks to mobilise fund through securitising their long-term loans.
He also said the BB is considering to ensure participation of the general investors in transactions of the secured bonds.
Currently, securitisation of debt is being taking place under a placement basis, the official said, adding it will be made in such a manner so that the participants can sell the commercial papers to general people/investors.
Such greater participation will not only ease the existing fund crisis of the financial institutions, especially the leasing companies but it will also help develop a capital market.
Market operators, on the other hand, argued that greater participation of individual investors in the transaction process was hardly possible.
They, however, sought necessary support from the government to make the new debt instrument attractive for both the financial institutions and general investors.
Terming the existing higher issuance cost as one of the major impediments, they also suggested that the government should waive the existing stamp duty to help reduce the cost.
Securitisations allow companies to bring forward revenues and create new capacity on their balance sheets. They have been popular with banks parceling up portfolios of mortgages to finance the issue of new bonds but they have also been used in connection with credit card payments and water company revenues.
This generally involves financing a ring-faced pool of assets, or a business, with recourse only to the cash flow from and value of the securities assets. Securitisation is frequently used as part of a broader financing package.
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