Borrow money, never pay back

It was a time when politics played havoc with the economy.

The BNP-led opposition called a series of hartals in 2013 ahead of the general elections demanding restoration of the caretaker government system.

The whole year was practically wasted and violence of the worst kind spread, bringing the economy to a grinding halt. The election was held in spite of that. The violence turned even worse as blockade continued until April 2015, giving businesses a hard knock. Production was hampered, distribution even more.

So in 2015, 11 big business groups, each of them having loans of over Tk 500 crore with different banks, led by Beximco made a proposal to Bangladesh Bank for restructuring the loans, some of which had become overdue, and the payments defaulted.

They wanted to have the repayment period extended because “their businesses were hit hard” by violence and political unrest.

The BB agreed, and asked the companies to have their business viability analysed by renowned chartered accountant (CA) firms enlisted as category “A” with the central bank. The banks concerned would then assess the CA reports, judge the cash flow projections and the boards of the banks concerned would decide if the restructuring was justified.

The banks would then send their reports to the BB for evaluation.

As planned, the central bank scrutinised the reports and approved the restructuring as a special offer, a one-time benefit on the condition that if the firms fail the banks will take legal action.

The companies agreed and they were given a lenient rescheduling benefit of only 1-2 percent down payment instead of the usual 10 percent.

According to the restructuring conditions, if any company failed to pay two consecutive instalments, it would be considered defaulting on loans and the restructured benefit would stand cancelled. The banks would then sue the company to recover the loan money.

The total amount of the restructured loan is Tk 15,000 crore. 

Two years down the line, six of these companies failed to repay instalments. They are Beximco, SA Group, Ratanpur Group, RSRM, Keya and MR Group.

Moreover, they are now claiming that the viability reports, business projections and cash flow analysis have all turned out to be wrong and they are seeking fresh restructuring and rescheduling of their loans.

Those who had certified that the companies would be able to pay back now shirk their responsibilities. The central bank is also apparently washing off its hands saying the issue should be solved on the basis of “bank-client relationship” contrary to what it had said before the restructuring.

Not only that, the BB also allowed some banks to further relax the concessions earlier given to the companies.

“Bangladesh Bank allowed some banks to extend the benefit to one or two clients,” said Abu Hena Mohd Razee Hassan, deputy governor of the central bank.

He admitted that the extension went against the special restructuring circular, but said it was given as “the last chance for the clients”.

The banks were given the go-ahead for the fresh extension only if they had confidence in the companies' ability to pay back, he said.

Contacted, former BB governor Salehuddin Ahmed said none of the parties -- the CA firms, the banks' audit committees, the bank boards and the BB -- involved in the restructuring process could avoid responsibility.

As the restructuring was done under certain conditions, the BB could take action against those who violated them, he added.

Khondkar Ibrahim Khaled, former deputy governor of the BB, blamed lax monitoring by the central bank for the nonpayment by the big borrowers.

According to him, fresh extension of the benefit would lead to indiscipline in the banking sector.

He suggested that the banks concerned take legal action against the borrowers.

The case of Beximco, the lead borrower that persuaded the BB to allow such a privilege, is interesting. One third of the Tk 15,000-crore loan restructured was taken by this group alone.

It makes profit, pays dividend and yet does not pay back loans, something many view as unjustifiable.

“It is not a good practice if a company declares dividend despite being a loan defaulter,” said Saifur Raman, executive director of Bangladesh Securities and Exchange Commission.

In September last year, Beximco even asked Sonali Bank to lower the interest rate and the size of the instalment. But the bank turned down the proposal and moved to take action to recover a Tk 1,075-crore loan from the company.

In a proposal to the state bank, the group said it could not pay the instalment because its business expansion was below expectation.

“It is impossible to pay instalments until new business starts,” the proposal reads.

On November 21, Sonali Bank sent a letter to the BB requesting it to take action against Beximco Group Vice Chairman Salman F Rahman.

The same day, the businessman filed a writ petition with the High Court and subsequently got a stay order on the default status.

A loan defaulter cannot hold the post of a bank director. Salman is also the chairman of IFIC Bank. He will lose that post if he becomes a defaulter.

Though the company could not repay the bank loan, it is going to take up some mega projects in the power and infrastructure sector.

The projects are expected to generate revenues in the next 18 to 24 months, enabling it to pay the instalments, reads a Beximco letter to Sonali Bank.

The company is a good performer in the stock market and has maintained its position in standard “A” category announcing a 10 percent dividend.

The company also declared 5 percent cash and 5 percent stock at the end of June 2017, according to the Dhaka Stock Exchange.

Beximco made a profit of Tk 101.79 crore in 2016-17 year. Its revenue was Tk 2,262 crore, shows its financial statement.

Though the firm made the handsome profit, it has paid only two instalments amounting to Tk 114.8 crore since the loan restructuring.

Beximco stopped paying the instalment in March last year, according to Sonali Bank documents.

Later, the company sought to have the interest rate revised down to 8 percent from current 10 percent. It also proposed to pay only the interest money for eight quarters starting from September 2017 to June 2019. It said it would pay the interest money first and then the principal amount.

On March 27, The Daily Star e-mailed Beximco through its public relations agency Impact PR for comments on the issue.

The PR agency requested this newspaper to hold this report until April 3. On Thursday, the agency, in another reply, said, “The loan is now regular with Sonali Bank”. 

However, when this correspondent contacted Sonali Bank, one of its senior executives, wishing not to be named, said Beximco was yet to make the payment. He said the company “only sent a proposal to repay the dues and the matter is being processed”.

The business group made the same proposal to three other banks -- Rupali Bank, AB Bank, and Exim Bank -- to whom it owed more than Tk 1,400 crore.

The three banks accepted the offer after the BB asked them to give the approval on the basis of “bank-client relations”.

“We provided further benefits against the restructured loan of Beximco following the no-objection from Bangladesh Bank,” said Md Ataur Rahman Prodhan, managing director of Rupali Bank that restructured loans of Tk 693 crore of Beximco.

Beximco along with five other affiliated business firms failed to pay two quarterly instalments against its restructured loan of Tk 1,849 crore with Janata bank.

It made the instalment payment of September quarter in late December last year. It, however, failed to pay the next two instalments of December and March quarters, automatically becoming a defaulter from April 1 as per the restructuring rules.

Each of the instalments was Tk 52 crore.

Meanwhile, instead of paying the dues, Beximco sought loans of Tk 9.80 crore against imported goods. The company sent a letter in this regard to the bank on April 2, show documents.

THE FIVE OTHER COMPANIES

The other five of the six companies have failed to continue paying instalments against their restructured loans of Tk 2,834 crore.

Shahabuddin Alam, owner of SA Group, is also a member of the board of directors of Mercantile Bank while Maksudur Rahman, managing director of Ratanpur Group, is a director of South Bangla Agriculture and Commerce Bank.

SA Group, Ratanpur Group, RSRM and MR Group have filed writ petitions with the High Court against its defaulter status, said Abdus Salam Azad, managing director of Janata Bank.

Ratanpur Group failed to continue its repayment as the size of the previous instalment was not “practical”, said Maksudur Rahman.

Keya Group which got approval of restructuring loans of Tk 879 crore with five banks did not take the facility in the end for not paying the required down payment. Later, the company filed a writ petition against its defaulter status, according to central bank.