HYDERABAD: In a key step towards pooling in funds for agriculture schemes, including loan waiver and Rythu Bharosa, the government has revised bidding eligibility criterion to choose a merchant bank that will assist it in raising bonds against securitization of land parcels.
The state government had earlier floated a tender seeking a Request for Proposal for an advisor with experience in raising funds through debt markets and handling the issuance of bonds.
The initial tender was issued last week with a requirement that the bidding firm must have experience working for a state government or its financial institution in assisting them in raising bonds of 5,000 crore at once. The eligibility criteria has now been tweaked to include expertise-raising bonds of 1,500 crore at once.
According to government sources, some interested firms wanted this criterion to be altered. Nonetheless, those companies must also show verifiable proof of their previous bond issuance experience. The government has also extended the deadline for submitting bids from Monday (July 1) to July 6.
The advisor cum merchant banker appointed will have to assist the government in raising bonds worth 5,000 crore, though the government is looking at 10,000 crore total. The firm appointed will take care of structuring and advising on many aspects of the issue (raising the bonds), such as credit enhancement structure, government guarantee, tax consequences, and type of placement (private or public), in cooperation with the corporation.
The advisor or merchant banker will assist the issuer (government entity looking for bonds) in selecting and appointing all relevant service providers, including legal counsel and rating agencies, for the production of transaction documents and the fulfilment of other procedures relating to the issuance, allotment.
The government stated in the original bid document that it aims to generate funds for bonds for capital expenditures and general purposes. This attempt can be classified as sort of off-budget borrowing and the government may use one of the existing corporations for this purpose to take loan instead of floating a new corporation.
Unlike mortgages on land parcels, the government can obtain these debts in the form of bonds at a lower interest rate and over a longer repayment period in the securitization of land parcels. Unlike in mortgage of land where the state government needs to give a guarantee for the lender, in securitization of land parcels the state government may or may not give a guarantee for repayment.
The state government had earlier floated a tender seeking a Request for Proposal for an advisor with experience in raising funds through debt markets and handling the issuance of bonds.
The initial tender was issued last week with a requirement that the bidding firm must have experience working for a state government or its financial institution in assisting them in raising bonds of 5,000 crore at once. The eligibility criteria has now been tweaked to include expertise-raising bonds of 1,500 crore at once.
According to government sources, some interested firms wanted this criterion to be altered. Nonetheless, those companies must also show verifiable proof of their previous bond issuance experience. The government has also extended the deadline for submitting bids from Monday (July 1) to July 6.
The advisor cum merchant banker appointed will have to assist the government in raising bonds worth 5,000 crore, though the government is looking at 10,000 crore total. The firm appointed will take care of structuring and advising on many aspects of the issue (raising the bonds), such as credit enhancement structure, government guarantee, tax consequences, and type of placement (private or public), in cooperation with the corporation.
The advisor or merchant banker will assist the issuer (government entity looking for bonds) in selecting and appointing all relevant service providers, including legal counsel and rating agencies, for the production of transaction documents and the fulfilment of other procedures relating to the issuance, allotment.
The government stated in the original bid document that it aims to generate funds for bonds for capital expenditures and general purposes. This attempt can be classified as sort of off-budget borrowing and the government may use one of the existing corporations for this purpose to take loan instead of floating a new corporation.
Unlike mortgages on land parcels, the government can obtain these debts in the form of bonds at a lower interest rate and over a longer repayment period in the securitization of land parcels. Unlike in mortgage of land where the state government needs to give a guarantee for the lender, in securitization of land parcels the state government may or may not give a guarantee for repayment.
Read More: Telangana govt tweaks criterion for advisor to help raise bonds | Hyderabad News