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UBL, Askari and Prime Bank may float Rs 4.3 billion terms finance certificates

KARACHI (January 05 2005): The United Bank Ltd, Askari Commercial Bank, and the Prime Commercial Bank Limited have planned to float terms finance certificates (TFCs) soon aimed at raising funds towards Tier-II capital for minimum capital requirement. These TFCs would jointly raise nearly 4.3 billion rupees to help expand their services and open new branches.

The United Bank Ltd (UBL) plans to raise 1.5 billion rupees from TFCs to financial institutions and investment companies, the sources at capital market said, adding the lead arranges are the Standard Chartered Bank Ltd and the KASB Bank Ltd, while the lead manager is Jahangir Siddiqui of Capital Markets Ltd.

The Karachi-based lender plans to raise 500 million rupees through the general public. The lender plans to sell eight-year bonds at 135 basis points plus trading yield of eight-year Pakistan Investment Bonds. A basis point is 0.01 percentage point.

Other lenders, the Askari Commercial Bank (ACB) plans to raise 1 billion rupees from institutions and 500 million rupees from the general public, while the Prime Commercial Bank to raise 640 million rupees from financial institutions and 160 million rupees from the general public.

These lenders-ACB and Prime Bank- plan to sell eight-year bonds at 150 basis points and 190 basis points respectively more than six-month Karachi interbank offered rate.

The advisors and arrangers for these TFCs are the National Bank of Pakistan Ltd, Global Securities Ltd, United Bank Ltd, Pak Oman Investment Co, and Crosby Asset Management Ltd.

Both these banks would use the proceeds of the TFCs for banking operations and would also contribute towards Tier II capital for minimum capital requirements as per guidelines set by the State Bank of Pakistan.

The listed corporate debt market size at the end of 2004, stood at Rs 32.1 billion as compared to Rs 30.2 billion last year, showing an increase of 6.3 percent.

Currently the listed TFC market is only 2 percent of the listed equity market. Last year, this ratio was around 3.3 percent and has declined due to expansion in equity market. The stock market for the third consecutive year recorded improvement. In 2004, it showed a growth of 39 percent as against 66 percent a year ago.

The consumer financing is showing growth and analysts believed that the market would see more listing of TFCs from banks and financial institutions in 2005 to strengthen their capital base and indulge into extensive lending.

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