MAPNA, SAIPA Raise $189m by Selling Securities

Two Iranian giants came to financial markets this week to raise money for their operations.

Iran's second largest automaker, SAIPA, and prominent energy group, MAPNA, sold 7 trillion rials ($189 million at market exchange rate of 36,960 rials per dollar) of securities to the public on Wednesday, Mehr News Agency reported.

Iranian companies are getting acquainted to using markets and Islamic securities to finance their projects instead of banks that have traditionally dominated the Iranian economic scene, but are these days neck deep in financial trouble.

>SAIPA's Murabaha

Automaker SAIPA raised 5 trillion rials from selling four-year Murabaha bonds on Tehran Stock Exchange's bond market on Wednesday. The bonds will bear 18% annual interest and SAIPA will use the money to buy parts and raw materials for its vehicle production.

SAIPA and TSE's chief executives, Mehdi Jamali and Hassan Qalibaf-Asl respectively, attended the ceremony to start the bond offering.

"Issuing Murabaha contracts is a suitable opportunity for us to use capital markets instead of relying on banks. Thus we are trying to use new forms of financing made available in capital markets," Jamali said.

SAIPA is fiercely pursuing its rival Iran Khordo.

As Iran's second largest automaker, it suffered severely from sanctions that cut its ties with French automakers after 2012. The pileup of overdue debt in the banking system, which has created a credit crunch, has worsened the company's position.

Yet the automaker is staging a comeback. It is increasing lost production at a rapid rate and reconnecting with old allies. French PSA group and SAIPA signed a joint-venture agreement to produce and sell Citroen vehicles in Iran on October 6.

According to Reuters, the 50/50 joint-venture will invest more than €300 million in manufacturing and R&D capacity over the next five years and produce Citroen models in Kashan.

Citroen models will be sold throughout the country via a network dedicated exclusively to the brand. No less than 150 Citroen outlets will open in the next five years.

SAIPA's shares have been closed for trading since October 22, due to the bond offering and a capital increase in SAIPA's subsidiary Pars Khodro, which had close ties to Renault-Nissan prior to sanctions.

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 paid in full.

 MAPNA's Salaf

Energy company MAPNA sold 2 trillion rials worth of Salaf contracts for electricity on the Iran Energy Exchange on Wednesday.

MAPNA is a group of Iranian companies involved in the development and execution of thermal and renewable power, oil and gas, and railroad transportation. The money will provide cash for MAPNA's plant in Sanandaj.

"The sale went well and there were nine bids for every one of the 523,471 contracts on offer," Shahriar Shamshiri, Sahm Ashna Brokerage's chief executive, told Boursepress. Sahm Ashna was handling the sale.

"So the sale was over in a fraction of a second and the securities were mostly bought by mutual funds and other institutional investors."

Their secondary trading will start in 10 days, bar holidays. The contracts bear 22% interest and their market maker has an obligation to buy them at 21% interest. If electricity prices rise, interest can go up to 23%.

IRENEX was formed in 2012, probably a bad time, as it was the height of Iran's financial crisis, to give markets a footing in the energy trade. Its creators wished for a crude oil benchmark akin to Brent and the West Texas Intermediate.

Yet, four years on, IRENEX is not much closer to this target than it was at its inception.

Today IRENEX's trading is almost exclusively in electrical energy. The "Standard Parallel Salaf"—an Islamic contract similar to futures with the difference that the contract's total price must be paid in advance—for electricity is the main traded product.