Premier Cement plans to raise funds to repay high-cost loans  

Infographics: TBS

Premier Cement Mills, one of the largest cement manufacturers in the country, has decided to raise up to Tk161 crore by issuing preference shares to repay its high-cost loans amid rising bank interest rates.

To raise the funds, it has offered 322 fully redeemable, non-convertible, non-participating cumulative shares at a face value or issue price of Tk50 lakh each, with a tenure of five years, according to a stock exchange filing on Thursday.

Preference shares are a type of company stock with dividends that are paid out to shareholders before any common stock dividends. In the event of bankruptcy, preferred stockholders are entitled to payment from the company's assets before common stockholders.

According to the disclosure, "The investors and company may choose to review the rate of dividend at the end of the 12th, 30th, and 42nd months, depending on the then-existing market conditions, based on average interest rates on deposits of more than six months and less than one year of scheduled commercial banks, with a range of 1.50%."

Dividends will be paid semi-annually in arrears.

The issuance of preference shares and dividend payments are subject to approval from the Bangladesh Securities and Exchange Commission (BSEC), the disclosure reads.

Eligible investors include scheduled local commercial banks (excluding 100% Sharia-based banks), corporates, non-bank financial institutions (NBFIs), high-net-worth individuals, including sponsors and directors of the company, and other institutional investors.

According to sources, lending rates have risen to over 14%, prompting the company to repay a portion of its short-term bank liabilities.

Kazi Md Shafiqur Rahman, company secretary of Premier Cement Mills, told The Business Standard, "The interest rate on bank loans has increased significantly. That is why the company is going to issue preference shares."

"The company has both local and foreign loans at different interest rates. Now, lending rates from local banks are over 13%. If a portion of the existing loans is repaid, interest payments will decline," he added.

According to its annual report for the fiscal 2023-24, the company has Tk479 crore in long-term loans and Tk1,617 crore in short-term loans. As of June 2023, its short-term loans stood at Tk1,352 crore.

It paid Tk159 crore in loan interest for FY24, a significant increase from Tk55 crore in FY23.

Previously, Premier Cement Mills offered 1,243 preference shares at a face value of Tk25 lakh each to raise Tk310 crore for repaying its high-interest loans and improving its financial indicators. 

However, it was able to raise only Tk151 crore, according to Kazi Md Shafiqur Rahman. The dividend rate for the preference shares ranges from 6.25% to 7.75%.