IKCO to Issue Securities Worth $153 Million

EghtesadOnline: Iran’s largest auto producer Iran Khodro plans to issue 7 trillion rials ($153 million) worth of Murabaha debt securities on Tehran Stock Exchange’s bond market next Saturday for five trading days.

News ID: ۷۸۱۸۱۸

21 February 2018

This is the largest volume of Islamic bonds the Iranian capital market has seen issued by one entity, the Persian daily Donya-e-Eqtesad reported.

"The four-year bonds will bear 18% interest and IKCO will use the money to purchase parts and raw materials required for its auto production," Mahsa Radfar, the head of Securities and Exchange Organization’s debt security issuance, said.

Bank Mellat will guarantee the bonds’ repurchase and Lotus, Omid and Mellat investment banks will be in charge of the underwriting process, according to Financial Tribune.

The debt market’s largest bond issuance was by IKCO’s rival, SAIPA, in November 2016 when 5 trillion rials ($108 million) worth of sukuk were issued.

Murabaha is an Islamic financing structure in which an intermediary buys a property with a free and clear title. Similar in structure to a rent-to-own arrangement, the intermediary retains ownership of the property until the loan is repaid in full.

IKCO was expected to go ahead with the bond issuance in September, but “internal [company] issues and problems with the guarantor” delayed the process for about six months, Abolfazl Shahrabadi, deputy head of Lotus Investment Bank for financing affairs, said.

The automaker produced more than 587,968 of vehicles during the first 10 months of the current fiscal year (March 21-Jan. 20), registering a 10.7% growth compared with the previous year’s similar period.

IKCO’s output for the 10th month (ended Jan. 20) grew 5.5% YOY to 68,323, according to statistics released by the Ministry of Industries, Mining and Trade.