The Issuance of Petro Borna Kish bonds: the successful experience of financing 1000 billion Rials through the financing services of Dana Investment

 

Obtaining banking facilities, often referred to as the money market, is commonly seen as the primary means of financing through debt. However, in developed financial markets, there is an alternative way to raise funds by tapping into the general public of real and legal investors through the issuance of fixed-income financing bonds in the capital market. These bonds, known as Sukuk, provide a suitable contractual framework for financing various projects with multi-year maturities. This framework addresses both the borrower's advantageous conditions, such as financing volume, time to maturity, and competitive interest rates, as well as the concerns of investors, especially those related to non-repayment and liquidity risks.

In the current economic climate of Iran, where companies face numerous financing challenges, one of the achievements of Dana Kish Investment's corporate finance team has been securing financing for the purchase of an Anchor Handling Tug Supply (AHTS) vessel for Petro Borna Kish through the issuance of one thousand billion Rials worth of Sukuk bonds. This reflects their strategic utilization of debt financing tools in the capital market. Notable features of this accomplishment include funding through capital market and money market guarantee, using floating asset (not real estate) as collateral with the bank guarantor, failure to present collateral to the intermediary institution (an event that occurs in leased Sukuk bonds), competitive guarantee fee rate, and the use of Murabahah bonds to secure fixed assets, which is rare in the capital market

We initiated a financial consulting and investment project, in pursuit of the set goals.

First, we gained a deep understanding of the business dimensions and contractual aspects of the AHTS’s usage.

We identified the cash flows generated by this investment opportunity, specifically the acquisition of the vehicle and its utilization in the maritime logistics market.

Next, we modeled the cash flows associated with financing options, including banking facilities or the issuance of Sukuk bonds, in order to assess their impact on cash flow dynamics.

After considering the project's economic viability on its own (prior to financing), its positive cash flows (after accounting for financing expenses), favorable relationships with the banking system, and the optimal structure of Murabahah bonds, we made the decision to proceed with financing through these bonds

In this regard, Dana Kish Investment successfully entered into a financing service contract with Petro Borna Kish, encompassing a comprehensive range of services necessary to navigate the bond issuance process and secure the consent of all stakeholders, particularly the guarantor. Following extensive negotiations with multiple banks and the presentation of the project's initial business plan, a preliminary agreement was reached to secure the guarantor's position at the lowest cost for the passenger vessel.

Simultaneously, the documentation and registration statement were meticulously prepared and approved by the company's auditor. Subsequently, upon the contract's signing by other entities such as the intermediary institution, the market operator (offering the most competitive fee rate), and the supply broker, these bonds were officially listed on the Iranian stock exchange on July 25th 2023, under the symbol "Petrobarna06."