IPDC finances in Quasi Equity in terms of Cumulative Redeemable Preference Share. Preference Shares is relatively a new concept in the country that was introduced by IPDC when it financed Holcim Cement. Subsequently, IPDC has made quite a number of investments in preference shares.

Some of the significant quasi equity finances of IPDC are:

• Holcim Bangladesh Ltd.
• Delta Brac Housing Corporation Ltd.
• Nasir Glass Industries Ltd.
• Saiham Cement Industries Ltd.
• Kazi Farms Ltd.
• Confidence Salt Ltd.

From the Issuers' point of view, preference share is a cheap source of finance as long as the issuing company enjoys tax holiday: but, once it starts paying tax, effective cost of debt becomes substantially lower and preference share becomes expensive. Moreover, this source of financing is usually a collateral free one. i.e no mortgage or hypothecation of assets are required. Some of the salient features of the quasi equity financing are the followings:

Facility Agreement

The facility is governed by a Subscription Agreement, which will contain usual clauses generally incorporated in the Subscription Agreement. The said facility will be treated as equity in the issuer's books. However, IPDC will have no directorship or voting right in the company issuing the Preference Shares.

Issue Price

The Issue Price to be paid by the Subscriber (IPDC) to the Company (Borrower) for the Preference Shares shall be inclusive of the ‘Par Value' and ‘Share Premium' agreed upon by both parties.

Dividend Rate

A fixed cumulative dividend at pre determined rate per annum will be payable on the outstanding issue price including premium. The rate however will be negotiated if there is a change in the present tax structure, which may adversely affect either party. In case the amended rate is not settled then the preferred shareholders may call for an early redemption. The Dividend is payable on Yearly basis. However, if the company is not in a position to declare the dividend the payable amount will be cumulative in next year as per the terms of the subscription agreement.

Buy Back Guarantee

Local promoter(s) will provide a guarantee to the effect that in case of any failure by the Company, for whatever reason, to redeem the preference shares as on the scheduled redemption date, the local promoter(s) will buy back the preference shares by making payment of full redemption amount to IPDC

Redemption

The share amount to be redeemed by the Company in yearly installments along with accrued dividend (e.g if the subscription amount is BDT 100.0 million and if it is supposed to be redeemed in five yearly installments then the annual redemption amount will be BDT 20.0 million, redeemable at each anniversary date of the subscription). However, if the Subscription Agreement allows, company may defer the redemption, with consent from the Subscriber, to the successive anniversaries. However, full redemption to be made on or before the last anniversary.

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