The shareholders of Dhaka Bank approved the issuance of perpetual bonds worth Tk 400 crore to comply with Basel-III.
The approval was granted at the listed commercial bank’s annual general meeting on June 29.
The perpetual bond would bolster the Additional Tier-I capital of the bank to support its Basel-III compliances.
Basel-III is an international guideline for banks’ capital adequacy which enables banks to withstand shocks in business.
Banks in Bangladesh are in the midst of a trend of issuing perpetual bonds. These kinds of bonds do not have any tenure and the money raised through them are considered banks’ Additional Tier-I capital.
Banks will now be capable of converting the bond liabilities into their equity in case of equity shortfall.
Because of its nature, bondholders cannot surrender their perpetual bond units to the issuer because of its nature.
However, the issuer was allowed by the regulator to recall the bonds in certain cases, such as an interest rate mismatch after a certain time, for example, a decade.
Dhaka Bank, beginning its journey in the mid-1990s, entered the stock market in 2000 and grew its paid-up capital to nearly Tk 900 crore.
Its market capitalisation was Tk 1,273 crore on June 29 as its share price inched up by 0.73 per cent to Tk 13.8 against the face value of Tk 10 each.
Based on the Emerging Credit Rating, the long term credit of Dhaka Bank is AA which is ST-2 for the short term.
A credit rating is a quantified assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation.