Tk 500cr Jamuna Bridge securitised bonds proposed

Investment Corporation of Bangladesh (ICB), responsible for offloading shares of government entities, recently proposed to the government to securitise Jamuna Bridge, the country's largest civil engineering project, by issuing Tk 500 crore bonds to be traded on the stock market.

Of the total amount, Tk 450 crore will be raised through issuance of bond securitisation in private and institutional placement, while Tk 50 crore will be raised from public.

Of the money to be raised, Tk 200 crore will be invested as equity for construction of Padma Bridge, while the rest of the amount will be invested in other areas such as building infrastructure and developing tourism.

Securitisation is a structured finance process in which assets, receivables or financial instruments are acquired, classified into pools, and offered as collateral for third-party investment. It involves the selling of financial instruments, which are backed by the cash flow or value of the underlying assets.

As per the proposal, the JMBA will raise Tk 300 crore against the security of its future tolls receivable in the next 10 years, while Tk 200 crore will be raised against the security of JMBA's fixed deposit receipt (FDR) worth Tk 200 crore.

Jamuna Multipurpose Bridge Authority (JMBA), which supervises the operational activities of the bridge over the Jamuna River, pursued the ICB to formulate the modalities for offloading shares.

The communications ministry has also sent a letter to the finance ministry for its consent to start the Jamuna Bridge securitisation process.

Earlier the JMBA, a concern of communications ministry, has submitted the securitisation proposal, sources said.

“After getting the approval, we will start the securitisation procedures,” said a JMBA official.

The securitised bonds will be offloaded as 'approved security' so that the financial institutions can keep the bonds as statutory liquidity requirement (SLR), according to the proposal.

Welcoming the initiative, Chief Executive Officer of Dhaka Stock Exchange Salahuddin Ahmed Khan said through securitisation the country can reduce its dependency on donors to build big infrastructure projects such as Padma Bridge or Karnaphuli Bridge.

Jamuna Bridge was inaugurated in June 1998. With a length of 4.8 kilometer and width of 18.5 meter it is the longest bridge in Bangladesh as well as in South Asia. Around Tk 3900 crore was spent on construction of the bridge.

Revenue from the bridge was Tk 107 crore in 2001-02, while the income was Tk 170 crore in 2002-03, Tk 160 crore in 2003-04 and Tk 180 crore in 2004-05, according to sources. Of the income, 70 percent came from toll collections.

Source: The Daily Star Website, January 1, 2008.