KARACHI, May 3: Engro Chemical Pakistan will issue domestic corporate bonds worth Rs4 billion ($66 million) to help raise funds for its new fertiliser manufacturing facility, banking sources said on Thursday.

Engro, Pakistan's second largest urea fertiliser producer, has mandated JS Bank and Citibank to jointly manage the bonds issue, known locally as term finance certificates (TFCs), they said.

“The TFCs, proposed to be listed on the Karachi Stock Exchange, will have an eight-year maturity and will offer a floating spread of 1.55 per cent over six-month Kibor (Karachi Interbank Offer Rate),” a banking source with knowledge of the planned issue told Reuters.

The benchmark six-month Kibor was at 9.70/10.20 per cent on Thursday.

“The total issue size is Rs4 billion, comprising a pre-IPO (initial public offering) component of Rs2.25 billion and an IPO of Rs750 million, while there would be a green shoe option of Rs1 billion,” the sources said.

The sources did not give any indication of when the issue would be launched.

The proceeds from the issue will be used to partially finance Engro's plans to build a $950 million fertiliser manufacturing facility with an approximate capacity of 1.3 million tons per annum.

Engro Chemical has a share of around 21 per cent in the country's fertiliser market and its manufacturing complex, located in Daharki in the southern Sindh province, produces 975,000 tons of urea per annum.

The company also markets phosphate and potash-based fertilisers to compliment urea and maintains a similar market share in this segment as well.

Engro also has intentions to raise money from international equity and debt markets to fund its expansion plans. —Reuters