Nassa can reschedule default loans with 1% down payment; no decision yet on Beximco

Highlights:

• Govt to allow Nassa Group to reschedule Tk8,676cr default loans with a 1% down payment to reopen factories
• Restart of Beximco Textile factories uncertain as Janata Bank rejects rescheduling Tk23,000cr loans without down payment
• However, banks to open LCs for profitable Beximco units under escrow ring-fencing and 100% margin rules
• Labour Adviser warns of legal action if Nassa workers' due wages not paid soon after selling assets via power of attorney from jailed chairman

The government has decided to allow Nassa Group to reschedule its Tk8,676 crore defaulted loans with a 1% down payment to restart its factories, but the reopening of Beximco's textile units remains uncertain as Janata Bank – owed Tk23,000 crore – refuses to reschedule its default loans without a down payment.

However, banks will issue letters of credit (LCs) for Beximco's profitable companies if all earnings are ring-fenced in a designated escrow account and a 100% margin is maintained, according to decisions made at the "Advisory Committee on the Labour and Business Situation of Industrial Units at Beximco Industrial Park" meeting held at the Secretariat yesterday.

Labour and Employment Adviser Brig Gen (Retd) M Sakhawat Hossain chaired the meeting attended by Finance Adviser Salehuddin Ahmed, Commerce Adviser Sk Bashir Uddin, Home Adviser Maj Gen (Retd) Jahangir Alam Chowdhury, secretaries of relevant ministries, and BGMEA President Mahmud Hasan Khan, among others.

Following the meeting, Nassa Group Vice Chairman Khandakar Mohammad Saiful Alam told TBS, "The committee has set the condition that Nassa Group's defaulted loans can be restructured with a 1% down payment. Once the down payment is made, our factory accounts will be reactivated, and we will be able to open LCs."

In a recent meeting with banks, the Bangladesh Bank has decided to exempt Beximco Group's profitable companies from Section 27Ka(3) of the Bank Companies Act, which normally bars all group entities from opening LCs if one defaults, allowing them to continue operations despite Beximco Textile's default

All of Nassa's apparel and textile factories currently remain closed due to a lack of operational funds, while around 25,000 workers are protesting for unpaid wages.

"We have accepted this condition. We will sell the group's land and deposit the down payment with the banks from which we took loans as quickly as possible," he said.

Sources said Nassa Group and its associated companies have taken loans totalling Tk10,300 crore from 22 banks and 1 financial institution, of which Tk8,676 crore is defaulted. The 1% down payment amounts to approximately Tk87 crore.

The committee also decided that top officials associated with Nassa Group will face travel restrictions abroad and have their passports seized until the loan and wage issues are resolved.

A senior Nassa Group official told TBS that last week, top executives of the group met imprisoned Chairman Nazrul Islam Mazumder at the jail gate, where he approved the sale of land to arrange the down payment.

Nazrul, arrested in Dhaka's Gulshan on 2 October 2024 in multiple cases linked to the July uprising that toppled the Sheikh Hasina government, remains a key figure in Nassa's survival.

In the meeting, Labour Adviser M Sakhawat Hossain has warned Nassa representatives that legal action will be taken against the owners of the group if the due wages of the workers of its factories are not paid soon. 

A senior official at Janata Bank said that Beximco wants to reschedule its Tk23,000 crore default loans without any down payment, but the bank's board and the central bank do not agree to this proposal

The Nassa Group official told TBS, "While a decision was taken about the loan issue, the group must sell assets to repay bank loans and clear workers' dues. Otherwise, the government has decided to file cases against the chairman and his wife and children."

"A delegation of government and Nassa officials, including senior army officers, will soon meet jailed Chairman Nazrul Islam Mazumder to secure a power of attorney on assets to sell them," he added.

BGMEA President Mahmud Hasan Khan, who also attended the committee meeting, told TBS that while a clear decision has been made regarding restarting Nassa Group's closed factories, progress on reopening Beximco Textile units remains limited.

Loan issues stall Beximco factory restart

A senior labour ministry official who was present in the meeting told TBS that no detailed discussion was held on restarting the closed Beximco Textile factories.

The official said that Beximco owes Janata Bank Tk23,000 crore, and the main concern is how the bank will recover this amount. Beximco factories may reopen under a tripartite lease involving Jaoan's Revival Project Limited, Janata Bank, and Beximco Group, but repayment guarantees for old loans remain unresolved, as Revival seeks a Tk400 crore working capital loan without assuming the existing debt.

A senior official at Janata Bank said that Beximco wants to reschedule its Tk23,000 crore default loans without any down payment, but the bank's board and the central bank do not agree to this proposal.

He said, Janata Bank is currently facing a severe shortage of investable funds, leaving no scope to offer concessions to the country's largest defaulting company [Beximco]."

Beximco Textile's senior officials, speaking on condition of anonymity, said that last year, before 5 August, Beximco Textile paid Tk500 crore as a down payment to reschedule default loans. The bank's board had approved the proposal and was preparing to forward it to the Bangladesh Bank. But after the government changed, the new board cancelled the proposal and recorded the Tk500 crore as a deposit against the loans. Beximco wants to count this as a down payment, but Janata Bank has refused.

A senior Bangladesh Bank official said Revival's proposal provides very little chance of loan repayment to Janata Bank. Revival has proposed back-to-back LCs from abroad, with payments also made overseas. Revival plans to take 8% commission from export proceeds, and the remaining funds would first go to pay worker salaries, then to operating costs like electricity and water, with any leftover amount going to Janata Bank. Therefore, the likelihood of Janata Bank recovering its default loans under this LC structure is very low.

Revival Project Limited has proposed an investment of $200 million to restart nearly 14 closed Beximco Textile factories, prompting the labour ministry to hold multiple meetings with lending banks, the Bangladesh Bank, and other stakeholders to facilitate the project.

Beximco's profitable firms' income to go to escrow account

In a recent meeting with banks, the Bangladesh Bank has decided to exempt Beximco Group's profitable companies from Section 27Ka(3) of the Bank Companies Act, which normally bars all group entities from opening LCs if one defaults, allowing them to continue operations despite Beximco Textile's default.

The firms – Beximco Pharmaceuticals, Beximco Communications, Shinepukur Ceramics, Teesta Solar, and Beximco LPG – will get policy support to open LCs for raw materials even with a 100% margin. To prevent fund diversion, their export-import transactions will be controlled by banks, with all income deposited into an escrow account for proportional debt repayments. Any new loans will require fresh feasibility studies.

Income from accounts linked to Beximco Sukuk bonds will be managed by the Investment Corporation of Bangladesh (ICB) as trustee, split between operating costs and bond repayments, while the bond terms will be restructured. 

Teesta Solar's Sukuk payments will be secured from the Bangladesh Power Development Board (BPDB) tariff bills, and for Beximco LPG, the Energy Division will review the formation of a new board, with lending banks allowed to use other banks for LCs if needed.

Farhan S Karim, an associate professor at Arizona State University and president of Ecomilli, said that Japan's Revival Project Limited and Ecomilli will invest $20 million to restart Beximco Textile factories, which will provide employment for 25,000 people. 

Through the BUET Investment Network in the US, this credit loan could be increased to $100 million, he said, adding that restoring foreign buyers' confidence, hiring skilled workers, and ensuring sustainable production will take 2–3 years, he added.

Legal action if Nassa Group workers' wages not paid: Labour Adviser

In the meeting, Labour Adviser M Sakhawat Hossain warned that legal action will follow if Nassa Group fails to clear the unpaid wages of the workers.

According to a labour ministry release, Nassa Group was told to secure a power of attorney from jailed Chairman Nazrul Islam Mazumder by 21 September to sell assets and pay workers' wages and allowances.

Failure to comply will lead to action against Nazrul Islam and cancellation of the passports of him, his wife, son, and daughter. The release listed 27 assets under their names.