Farjana Hossain Dhara

ID# 1348

FNB 308: Merchant and Investment Banking

Corporate Finance & Syndication
Issue Issuer Investor

Underwriting
Origination Underwriting Syndicate

Distribution
Corporation Government

Bangladesh Bank/
Treasury Government Agency

Municipality
Equity Debt
Mortgage
Common
Bonds

Preferred Debentures

Notes

Commercial
Papers
 Public Offering

 The sale of equity shares or other financial instruments by an organization to the public in order to raise
funds for business expansion and investment. Public offerings of corporate securities in the U.S. must be
registered with and approved by the SEC and are normally conducted by an investment underwriter.

 Private placement

 The sale of securities to a relatively small number of select investors as a way of raising capital. Investors
involved in private placements are usually large banks, mutual funds, insurance companies and pension
funds. Private placement is the opposite of a public issue, in which securities are made available for sale
on the open market.
 Must be registered with BSEC

 Offering procedure is well defined and must be followed

 Involves floatation cost

 Required due diligence by the investment bank to help issuer to prepare offer documents for
understanding it by the investment for their investment decision
It involves

 Mandate from the issuer, call it as “Do the deal”

 Negotiation of offering price

 Size of the issue

 Underwriting spread = Offering price less issuer price

 To raise capital

 Cash out by the founders

 Acquire capital to effect transition of ownership and control – leverage buy out

 Alter the capital structure

 Regulate by information

 All information must be disclosed by issuer and issue manager

 Issue manager called lead underwriter/ lead manager/ book running manager

 Co manager – other associate underwriter

 Paradoxical

 Represents firm and also paid by them

 Legal responsibilities to present all material information

 Reasonable investigation to represent all information to the public

 Liable for any misstatements/ misleading

 Arrangement of road show

 Underwriting syndicate formed

 Prospectus printout

 Certificates are printed

 Arranging road show for attracting public to investment in the securities

 Difference
Underwriting Fixation of
between firm
agreement with price, amount of Agreement
commitment
the issuer size and fees
and best efforts
Just like
Firm
insurance policy
commitment

Risk transfer
Best efforts
Fees for
guarantee
Standby
underwriting Offering price
 Distribution Structure of The mezzanine The sub-major
syndicate syndicate bracket bracket
• to distribute • The bulge • The • The sub-
the securities bracket mezzanine major
as fast as • The major bracket bracket
possible bracket
 Types of distribution

 Managers
 The preferred group/ dealers
 Non-preferred group/ dealer

 Stabilizing bid

 Market slang or green shoe options

 Additional securities purchase by IB @ offer price

• Naked short
 Repurchase shares to sell more shares in the market
 No commission or fees charged but they get underwriting spread

 In Bangladesh, there is an underwriting commission for the syndicate

 The gross spread dividend into three parts

 Management fees – for manager

 Underwriting fees – gross spread for underwriting syndicate to bear cost of legal, admin,
advertising etc
 Selling concession – brokerage fees for brokers for sell of securities
 The filing is good for two years

 Any time they can offer securities within this two years

 It is not applicable in Bangladesh

Offshore market –
outside home Dual syndication
country
• one syndicate from
local purpose and
• Another one from
outside
Primary seasoned offerings

Secondary seasoned offering

Combined offering
Private placement
Commercial
in the context of
papers
Bangladesh
• Short term nature
• Issued by
corporations