Kathmandu. Nabil Bank Limited has completed the process of allotment of unsecured preference shares. The bank has allotted preferential shares targeting institutional investors.

The bank is issuing 50 million units of shares at a price of Rs 100 per share. Nabil has issued unreserved preferential shares worth Rs 5 billion. Nabil had issued “Nabil 8% Unredeemable Unreleased Preferential Shares”.

A non-redeemable reserve preference is a capital markets instrument with the characteristic of providing a fixed percentage dividend rate without a specified share period. Those who invest in Nabil’s unredeemed unsecured preference shares will receive 8% dividend.

Only institutional investors will be allowed to invest in these shares to be issued through circular method. Individual investors, mutual investment schemes and securities entrepreneurs licensed by SEBON are not allowed to invest in it.

According to the provision made by the Rastra Bank, the unissued unreleased preference shares are likely to be converted into ordinary shares of the promoter group. Similarly, the company distributes dividends only in the year it earns distributable profit.

Since it is not able to distribute dividends from the year it is in loss and accumulated profits, it is called a preference share of a reserve nature. This type of instrument has been used in the international capital market to strengthen the capital structure of financial institutions after the global financial crisis of 2007-09.