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Premier Cement Mills is planning to issue preference shares to raise Tk 1.61 billion for prepayment of high-cost debts.
The board of directors has decided to issue only 322 shares at a face value/issue price of Tk 5 million each, said the company in a stock exchange filing on Thursday.
The preference shares will be fully redeemable and non-convertible in nature, with five years' tenure. Dividends will be paid semi-annually.
According to the company's audited report for FY24, Premier Cement's short-term debts stood at Tk 16.17 billion taken from private commercial banks, according to data available until June this year.
The recent spike in interest rates has pushed the repayment pressure.
The interest rate has been on the rise since the government removed the ceiling on lending rate in July last year and introduced market-driven interest rate in May this year.
Subsequently, the company's finance expenses shot up to Tk 1.70 billion in FY24 from Tk 683 million the year before.
A portion of the high-cost loans will be paid back with the fund to be raised, which will reduce the burden of interest payment, thereby increasing the company's financial strength, said company secretary Kazi Md Shafiqur Rahman.
Premier Cement will issue the shares to eligible investors -- commercial banks (excluding 100 per cent Shariah-based banks), non-banking financial institutions, and high net-worth individuals, including sponsor-directors of companies, trusts, brokerage firms, and asset management firms, according to the disclosure.
Investors and issuers may review the rate of dividends at the end of the 12th, 30th and 42nd month considering market conditions of the time. The rate may be decided based on the average interest rate on deposits over a period of more than 6 months or less than 1 year in scheduled commercial banks. It will not go above or below 1.50 per cent from the reference rate.
The company secretary said the main purpose of issuing the shares would be to restructure the balance sheet and to make prepayment of existing high-cost debts.
Preference share, also known as preferred stock, is an exclusive share option which enables shareholders to receive dividends announced by the company before the equity shareholders.
Preferred shares typically pay steady dividends, while common stock only pays dividends if they are approved by the board of directors based on financial performance of the firm.
The company is yet to fix the dividends to be paid to subscribers of the preference shares.
It will, however, have to offer lower than the existing lending rate. Otherwise, it will not be worth issuing preference shares to replace bank debts, said Akramul Alam, head of research at Royal Capital.
The share issuance is subject to the regulatory approval of the Bangladesh Securities and Exchange Commission (BSEC).
Annual business performance
Premier Cement returned to profit in FY24, as sales went up and prices of raw materials fell, after enduring losses for two consecutive years.
The cement maker's sales jumped 23 per cent year-on-year to Tk 26.92 billion in FY24, supporting a profit of Tk 742 million in the year.
It made losses in FY22 and FY23 mainly for costlier raw materials alongside sharp depreciation of the taka against the dollar.
Reduced foreign exchange losses and running operations at a new factory helped Premier Cement produce cement at a low cost. That improved the company's ability to stay afloat in intense competition, said the company.
The foreign exchange loss plunged to Tk 103 million in FY24 from Tk 1.04 billion a year ago.
Buoyed by the profit, Premier Cement declared a 21.5 per cent cash dividend for FY24. It paid a 10 per cent cash dividend for FY23.