KARACHI: Engro Fertilisers will become the first company to launch commercial paper on the KSE’s over-the-counter (OTC) market next week, sources said on Wednesday.

The debt instrument of the private company will be listed at the exchange on January 17 and the trading will commence a day after. Engro plans to raise one billion rupees through the launch of the commercial paper.

Only qualified institutional buyers will be allowed to trade in the commercial paper and the paper will not be available for the general public, they said.

Engro would use the proceeds to finance its working capital requirement.

According to the sources, the unsecured commercial paper of six-month tenor would have an effective rate of 14.14 percent per annum. The base rate is defined as the six-month KIBOR plus 1.25 percent prevailing on the base rate setting date.

JS Global Capital has been appointed as the market maker, which will quote bid, offer and spread for the commercial paper on a daily basis. It would also intimate the issuing and paying agent, JS Bank and stock exchange of any trade in the instrument, the sources said.

Sale of the instrument will be acknowledged in writing by JS Bank and the bank on maturity would pay investors on the face value of the instrument upon presenting the original note.

The paper could be redeemed at a face value upon presentation by last endorsee to the JS Bank, they said.

Engro Fertilisers is the second largest urea producer in Pakistan, with its plants at Daharki, Sindh.

As of December 2009, Engro’s urea plant capacity was 975,000 tons per annum, while the company’s market share stood at 15 percent.

Engro Fertilisers’ revenue was Rs9.4 billion during the first half of 2010. It posted a profit-after-tax of Rs2 billion, while the company’s assets stood at Rs85.7 billion.