Beximco refuses to mortgage land, putting Tk3,000cr Sukuk at risk as maturity nears
The proposals were outlined in a report submitted by the ICB to the Bangladesh Securities and Exchange Commission on 30 June after Beximco declined to execute a mortgage deed over land associated with its solar projects.
Promoted as an asset-backed bond, Beximco's Tk3,000 crore Green Sukuk was issued without transferring its underlying project land, a gap that has now forced its trustee, the Investment Corporation of Bangladesh (ICB), to seek an immediate mortgage on 100 acres to protect investors and mitigate default risk.
But Beximco has refused to execute the mortgage deed on its solar park land, citing legal and governance constraints. The state-owned investment institution is now pushing for a structural overhaul and an extension of the bond's terms through 2032.
The proposals were outlined in a report submitted by the ICB to the Bangladesh Securities and Exchange Commission on 30 June after Beximco declined to execute a mortgage deed over land associated with its solar projects. The Business Standard has seen copies of the correspondence.
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Trustee seeks mortgage to protect investors
Fearing a possible default on the Sukuk, the Bangladesh Bank and the ICB decided to create security over the underlying land assets in an effort to protect investors. As part of the process, the ICB verified ownership documents for the Teesta Solar and Karatoa Solar projects and paid land taxes on 125 acres out of a total of 650 acres.
The central bank move came as 22 public and private banks, along with several of their subsidiaries, invested significantly in the Sukuk.
Following the verification process, the ICB identified 100 acres as suitable for mortgaging in favour of the Beximco Green Sukuk Trust and sent the company a mortgage deed.
In its report to the securities regulator, the ICB warned that several factors could jeopardise the final redemption scheduled for December 2026, including Beximco Group's financial distress, prolonged shutdowns at textile units, weak cash flow, incomplete implementation of the Karatoa Solar project and limited access to alternative financing.
The five-year Islamic bond, issued in December 2021, raised Tk3,000 crore from the capital market. Of the outstanding amount of Tk2,809 crore, institutional investors, including banks, non-bank financial institutions and bank subsidiaries, hold 97.72%, while individual investors account for only 2.228%.
Beximco cites legal obstacles
In a letter to the ICB dated 20 May, signed by Managing Director Osman Kaiser Chowdhury, Beximco argued that the existing trust deed governing the Sukuk contains no provision for creating additional security through mortgages. The company said such measures had neither been contemplated nor incorporated when the Sukuk was structured.
Beximco maintained that any mortgage over project land would require amendments to the trust deed, legal vetting, Shariah board approval and consent from the relevant corporate boards. The company also argued that board meetings could not currently be held because of pending writ petitions concerning the composition of Beximco's board.
The company further stated that registration costs associated with any mortgage arrangement should be borne by the ICB and should not be deducted from payments receivable from the Bangladesh Power Development Board.
ICB seeks six-year extension
In a separate letter to the BSEC, the ICB sought to extend the Sukuk's final redemption deadline to 2032, arguing that Beximco's ongoing financial difficulties and the closure of several textile units had created uncertainty over repayment capacity.
The proposal stems from recommendations made by a high-level committee formed by Bangladesh Bank under Deputy Governor Mohammad Kabir Ahmed following a meeting chaired by the central bank governor on the recovery of loans extended to Beximco Group.
The committee recommended extending the Sukuk's maturity to 2032, changing its term structure, mortgaging the solar parks' immovable assets in favour of the special-purpose vehicle, publishing semi-annual financial statements for the projects, implementing the Karatoa Solar project through a third party and considering investment of the sinking fund in government Sukuk instruments.
Why investors avoid conversion
Under the Sukuk structure, investors were expected to convert at least 20% of their holdings into Beximco shares each year. However, cumulative conversion has reached only 6.37%, far below the expected 60% over three years. Around Tk190.75 crore had been converted into shares by 2024, while virtually no conversions have taken place since August 2024 following the fall of the Awami League government.
According to ICB, investors have been discouraged by the large gap between the Sukuk conversion price and Beximco's market price. Although the instrument allows annual conversion at a 25% discount, institutional investors largely chose to retain the bond because of concerns over the company's financial condition and the guaranteed semi-annual return.
ICB said that, in 2025, only 350 Sukuk units were converted into 420 shares, compared with 1.7 crore units converted in 2022 during a bullish market phase.
The Sukuk currently pays investors an annual return of 9%, distributed on a semi-annual basis, and no payment defaults have occurred so far.
The primary deterrent had been the "floor price" trap; while the conversion price for 2025 was set at Tk82.58, investors correctly anticipated that the stock was overvalued while locked at its Tk110.10 floor.
Their fears were vindicated on 8 June 2026, when the regulator lifted the floor price, triggering a free-fall that saw the scrip plummet 74% to Tk26.10. For any investor, converting a debt unit into equity at Tk82.58 when the market price is hovering near Tk26 would result in an immediate and massive capital erosion, said a senior officer of a bank who holds a significant portion of Sukuk.
Use of Sukuk proceeds
According to ICB, Beximco had originally planned to invest Tk1,885.83 crore in the Teesta Solar project, Tk308.31 crore in the Karatoa Solar Park and Tk805.86 crore in the environmentally friendly expansion of Beximco Textiles.
In reality, the company invested Tk2,155 crore in Teesta Solar, only Tk39 crore in Karatoa Solar and Tk806 crore in the textile expansion programme. While the Teesta Solar project and the textile expansion were completed, the Karatoa Solar project remains unfinished.
ICB said that between 2022 and June 2026, it paid Tk1,301.52 crore to Sukuk holders. Revenue of Tk1,780 crore came from electricity sales to the national grid, while Beximco contributed Tk363 crore in periodic payments. After paying investors and meeting operating expenses, ICB transferred Tk365 crore to Teesta Solar and retained Tk509 crore in the fund.
