Beximco moves BB for 12-year loan restructuring

Beximco Group, in a restructuring proposal to the central bank, is seeking softer terms such as longer time and lower interest rate to repay over Tk 5,000 crore owed by its Textile and Garments Division to several local banks.

Bangladesh Bank has sought opinions from seven banks – four state-owned and three private -- on the Beximco proposal.

The Group Vice Chairman Salman F Rahman in the Aug 5 letter to the governor also suggested that there be a temporary suspension of two and a half years on mandatory repayments.

It proposed that the banks charge a 10 percent interest rate – rather than usual 18 – on the loan. Rahman argued that the Group had repaid over Tk 800 crore in the last three years, draining its working capital.

He based his proposal on an assessment done by a prominent audit firm, the letter says.

The central bank on Aug 19 asked four nationalised and three private banks for their take on the proposal including a 12-year restructuring period.

But a Bangladesh Bank source said there had been no response until Thursday from any of Sonali, Rupali, Agrani, Janata, National, Exim and AB banks.

The Beximco idea is nothing new though, some bankers claim.

Another top Bangladeshi conglomerate, Islam Group, had secured a similar leeway before, in the 1990s.

Companies facing working capital crunch in other countries also get such facility.

None of those at the helm of the central bank when the Islam Group got the extra-ordinary support was available for comment.

In the letter, Beximco said “politically motivated credit restrictions on the group from 2001 to 2008, as well as other forms of harassment in the past” meant it was struggling to get enough working capital for some time.

It added that various companies of the group rescheduled their loans from 2009 to this day to avoid “imminent default” even though there had neither been the required cash flow nor the ability to repay.

These “ad hoc solutions which provided only temporary respite” led to “long term structural mismatch between cash generation and repayment schedule”.

The repayment obligations “put a severe strain on the working capital so much so that Beximco Ltd “is facing extreme liquidity crisis and is on the verge of closing down.”