‘The architect of default culture’
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With Tk 5,245 crore loans to seven banks at that time, Beximco, in a letter to the central bank, called for urgent debt restructuring to survive. On January 29, 2015, the Bangladesh Bank issued a new large loan restructuring policy, under which the central bank entertained applications from borrowers of Tk 500 crore and above.
Some 11 business groups quickly grabbed the opportunity and restructured about Tk 15,000 crore of their defaulted loans -- and Beximco alone accounted for a third of the amount, according to a report published by this newspaper at that time.
The borrowers were given a lenient rescheduling benefit of only a 1-2 percent down payment instead of the usual 10 percent and a maximum repayment tenure of 12 years. The policy allowed banks to withdraw the facility if any borrower failed to repay two consecutive installments.
The Bangladesh Bank added that the lenders may sue the borrowers in case of failure to repay the loans. The subsequent actions of Beximco showed that it did not bother.
Under the policy, state-owned Sonali Bank had restructured Tk 1,070 crore in Beximco’s loans for 12 years to 2027 at an interest rate of 10 percent, which was much lower than the 13-14 percent interest rate prevailing then.
After a year’s grace period, effective from September 2016, the borrower was supposed to pay Tk 57.4 crore each quarter to Sonali. By December 2017, the borrower was obliged to pay six installments, but Beximco made only two payments. And it became a defaulter at the end of December 2017.
Sonali did not withdraw the facility, nor did it sue Beximco.
Rather, it rescheduled the loans given to Beximco again in March 2018. In doing so, Beximco was not required to make any down payment although the central bank’s rules said at least a 10 percent down payment of the defaulted loans was necessary to restructure the loans.
“Salman F Rahman has become synonymous with a loan defaulter despite his contribution to the industrial sector,” said Faruq Mainuddin, a banking sector analyst.
“When Beximco began, it was the first conglomerate to establish a corporate culture in Bangladesh,” he said, adding that the company’s loan default culture goes as far back as the regime of the late military ruler HM Ershad.
“But it enjoyed leverage everywhere because of its enormous industrial presence,” said Mainuddin, noting that banks were shy of taking legal steps against Salman’s company.
Beximco has operations and investments across a wide range of industries, including textiles, pharmaceuticals, ceramics, real estate, food, information and communication technology, media, DTH, financial services, and energy. Beximco Group employs over 70,000 people worldwide and generates $2 billion in revenue a year, according to the company’s website.
HIS DARK PAST IN GMG AIRLINES
Salman’s dark past in GMG Airlines is a textbook case of manipulation. GMG had been sliding financially since starting operations in 1998, accumulating a loss of Tk 42 crore until 2006. In 2007, it started making a trivial annual profit of Tk 1 crore. Then it got a messiah. Beximco suddenly bought half the equity stake in GMG in 2009, and things started looking up since.
The profit of GMG jumped to Tk 79 crore in 2010 without any discernible reason, and it showed a golden dream to the public by offering Tk 300 crore in a private sale at a 400 percent premium with the promise that it would soon be traded on the stock markets. New planes would be bought and GMG would fly to new skies.
None of them happened though. The Securities and Exchange Commission discovered financial fraud in the company’s books and found its profits fictitious. It did not allow GMG to offer IPOs. Those who bought its shares in private placements never got back their money.
Sonali Bank, which lent GMG Tk 247 crore with a guarantee from Beximco, also never got back its money.
Salman successfully halted a move by Sonali Bank to auction his and his brother’s property in 2016 for the failure of GMG Airlines to repay loans.
RUINED DEBENTURES MARKET
Salman is still accused of ruining the debentures market in Bangladesh as he delayed the repayment of around Tk 100 crore in funds that he raised in the 1990s.
A debenture is a type of debt instrument that is unsecured by collateral and investors rely on the creditworthiness and reputation of the issuer while corporations and governments issue debentures to raise capital or funds and pay interest for holding the debentures.
Beximco issued four debentures in 1994-95 for a tenure of 10 years. Although their tenure ended in 2004 and 2005, the issuer did not repay the funds to investors until 2021.
As Beximco was preparing to issue sukuk to raise Tk 3,000 crore in the same year, the company’s debenture default issue came to a head. Public criticism by investors prompted the SEC to order the company to repay the dues. Beximco repaid the funds 15 years after the cut-off time.
BOND MARKET
Beximco issued the country’s largest sukuk in 2021 through which it raised Tk 3,000 crore. Salman used his political leverage for the bond sales. No banks and non-banks were interested in subscribing to the bonds.
Salman pressurised institutional investors to park money in his company’s sukuk, with some banks hesitatingly investing a low amount. So, the SEC had to extend the subscription time at least twice.
Salman went as far as to “force” Bangladesh Bank to change rules so that banks can invest in sukuk by borrowing funds from a scheme designed only for the stock market, not for shariah-compliant bonds.
His company has never admitted wrongdoing, but people familiar with the issue say the central bank was forced to issue a circular allowing the banks to invest borrowed funds in sukuk.