Western Marine sued for Tk938cr default to National Bank

Infographic: TBS

Western Marine Shipyard, a publicly traded company engaged in shipbuilding, has been sued for defaulting on loans amounting to Tk938.72 crore to National Bank.

Suja Uddin Al Mamun, principal officer of the bank's Agrabad branch, filed the case on 3 May with the Chattogram money loan court. 
The court has issued summons against the company's Chairman Md Saiful Islam, Managing Director Captain Sohel Hasan, and eight directors, according to court sources.

National Bank officials said that the shipbuilder took multiple loans covering various categories such as letters of credit, term loans, and cash credit (hypo) from the bank since 2014, which amounted to Tk528 crore the following year.

The company had earlier paid some instalments but it has stopped repaying since 2019. Despite numerous attempts to reschedule the loans, Western Marine has failed to comply with the repayment terms, resulting in a total outstanding amount of Tk938.72 crore.

A senior official at the bank's Agrabad branch told The Business Standard on condition of anonymity that it had previously issued a legal notice to the company due to unsuccessful attempts to collect the loans.

An attempt to auction the mortgaged property of the company in the absence of bidders. As a result, following instructions from the head office, the bank had to file a loan case against the company, he said.

Earlier, in 2021, the Agrabad branch of Bank Asia filed a loan default case of Tk505 crore against the same company.

Abul Mansur, general manager (finance) of Western Marine, said it is facing a major problem with cash shortages.

"The crisis has been exacerbated by various domestic and international situations, especially the Covid-19 pandemic. The situation worsened when banks stopped providing lending assistance. However, the directors of the company are working with organisations concerned, including the Bangladesh Bank, to revive its business," he said.

They were also facing the bank cases in court to solve the problems, he added.

"At present, the company is constructing two army landing crafts, a fishing boat for JK Group, and seven cargo vessels for Evergreen Shipping Company. These projects employ over 150 permanent and temporary workers," he added.

Founded by 15 entrepreneurs, Western Marine entered the shipbuilding industry in 2000 and earned a strong reputation in the international market, having constructed 150 ships of various categories until 2019.

The company has exported 33 ships to 12 countries, including the Netherlands, Denmark, Kenya, Finland, Germany, the United Arab Emirates, and India, with a business volume of approximately Tk2,000 crore and foreign exchange earnings worth about Tk1,400 crore.

However, due to internal conflicts among directors, huge debts owed to banks and financial institutions, and a financial crisis, the company's activities have come almost to a standstill since 2019.

According to sources, Western Marine owes nearly Tk2,000 crore to 19 banks and financial institutions. In 2014, the company raised Tk157.50 crore from the capital market through an initial public offering.

However, in the past five years, the company has not been able to repay loans.

And in 2020, it started posting losses.

Prior to 2019, approximately 3,000 workers were employed by the company, but the current workforce has dwindled to only 150. The company owes around Tk8-10 crore in unpaid salaries to its former workers and also owes more than Tk2 crore in unpaid rent for the leased land on which the shipyard is situated.

AKM Saiful Islam Chowdhury, executive vice president and zonal head (Chattogram) of Bank Asia, said that the period between 2008 and 2019 was the golden age for Western Marine. "As an emerging company, it was able to obtain easy loan facilities. However, despite making a profit from building ships, the company's leaders failed to repay the bank loans on time."

"As a result, the debt burden of the company is several times higher than its assets, which puts lenders at risk of debt recovery," he added.

Captain Tareque M Nasrullah, executive director of Western Marine, however, said the company, like the entire industry, had to face three major shocks in the last 15-16 years: first in the 2008-10 period due to the global financial meltdown, then again in 2013 due to the global shipping slump, and finally during the pandemic.

He thanked the government for the Shipbuilding Policy a few years ago that addressed the nature of the industry, acknowledged the risk factors involved with the capital-intensive business, and paved the way for low cost financing.

Full implementation of the policy and the cooperation of lenders would help the company grab the opportunities already open in the international market, he said, adding that foreign orders worth $200 million were in the pipeline for Bangladeshi shipbuilders.

Western Marine shares having a face value of Tk10 have been stuck at the floor price of Tk11 apiece on the Dhaka Stock Exchange for more than six months.