Internet provider Shatel plans to sell 10 trillion rials ($281 million) of Murabaha bonds on the Iran Fara Bourse, Securities and Exchange News Agency SENA reported on Wednesday.
The company needs cash for its operations and is betting on corporate bonds to raise the capital for its expansion plans.
“Our company needs new funds for expanding its operations and we hope to raise funds from capital markets,” said Shatel CEO Shoja-aldin Mirtavousi.
Mirtavousi wants to offer the bonds in five installments to make the sale smooth. Due to a shortage of bonds in the markets, the sale is likely to draw enthusiasm from institutional investors.
Demand is high for fixed-income securities currently, as a morbid stock market and pessimism about the country’s short and medium term economic prospects have curbed both risk taking and investors’ appetite for the security of bonds.
In the previous corporate bond offering by Iran’s largest carrier, Mahan Air, demand outstripped supply 16 to 1, according to Mohammadreza Mohseni, head of Central Securities Depository of Iran.
The yield on Shatel’s bonds has yet to be announced, but if current interest rates are anything to go by, their yield will pass 18% per annum, which exceeds the 15% interest banks offer on one-year deposits.
Previous Bond Sales
Mahan Air offered 2.1 trillion rials ($59 million) of Ijarah sokuk in Khordad (Iranian month ending June 20) on the Iran Fara Bourse. The Tehran-based airline plans to sell five trillion rials ($145 million) of the Ijarah sokuk to renew its aging fleet of 57 aircraft.
With the Shatel bond offering, it will become the seventh company to sell Islamic bonds in this fiscal Iranian year that started in March.
Sharq Cement, Joopar Passenger and Freight Trains Co, Rightel phone network operator, Esfahan’s Mobarakeh Steel Co, and Maskan Bank along with Mahan are the other six companies that have sold bonds so far this year. The six have raised a total of 13.6 trillion rials ($382.5 million) through sukuk, according to Mohseni.
Murabaha is an Islamic financing structure in which an intermediary buys a property with free and clear title. In a Murabaha contract of sale, the bank buys a specific item from a client for a predetermined profit over the cost of the item, then sells the item back to the client in installments. In bond form, investors will take the bank’s place in the contract.
