SEBON Approves Two New Debentures; When Will they Open for Application?

SEBON has given approval to debentures of two different commercial banks.

What is a Bond/ Debenture?

In finance, a debenture is a medium- to long-term debt instrument used by companies to borrow money at a fixed rate of interest. Simply put, you get paid a certain percentage of returns each year for your money that you let them use. Although this might feel like depositing money at the bank, debentures pay higher than the interest rates on banks and financial institutions.

Both corporations and governments frequently issue debentures to raise capital or funds. Governments typically issue long-term bonds—those with maturities of longer than 10 years. Considered low-risk investments, these government bonds have the backing of the government issuer. Corporations also use debentures as long-term loans.

Investing in the shares of companies certainly feels more lucrative than investing in boring bonds or debentures. However, as much profit potential that investing in the secondary market carries, they have equal downsides. The stock market is a place to lose money as much as it is to gain. On the other hand, a debenture is a dead-simple method of investing where you get a considerable percentage of returns by depositing your money, doing virtually nothing.

Luckily, the Debenture scenario of Nepal is also inching along with the IPO hype. More and more institutions are issuing debentures to fulfil the need for capital. Since these companies invest in Nepal themselves, investors will likely get a sense of contribution to the country by investing in these fixed-income alternatives.

SEBON has given approval of issuance to the following debentures. Sharesansar called their respective issue manager to inquire when the issue will be open for application.

1) 8 years, 8.75% Prime Debenture 2085

SEBON gave its approval on Poush 26 earlier this year. "8 years, 8.75% Prime Debenture 2085" is a debenture proposed by Prime Commercial Bank Limited. The debenture has 35 lakh units registered of which 14 lakh will be opened to the public and 21 lakh units will be subscribed via private placement.

RBB Merchant Banking Limited has been appointed the issue manager. According to the issue manager, the opening date will likely be on the 18th or 19th of this month, i.e. Falgun, 2077 BS. However, note that this is only a rough estimation. The issue manager will decide on the matter soon and will probably unveil the offer letter this week itself.

2) 10 years, 9.5% NCC Rinpatra 2086

SEBON gave its approval for this debenture on Magh 05 earlier this year. "10 years, 9.5% NCC Rinpatra 2086" is a debenture proposed by NCC Bank Limited. The debenture has 30 lakh units registered of which 12 lakh will be opened to the public and 18 lakh units will be subscribed via private placement.

Nabil Invest is the issue manager for the debenture. Although the board already approved the debenture, the issue manager has resubmitted an application just to reconfirm with the board, given that NCCB has had an AGM and a change in its management structure. While they expect to receive approval from the board this week itself, the debenture might open later this month.