BSEC disapproves Yeakin Polymer sponsors' share acquisition over loan NOCs

The Bangladesh Securities and Exchange Commission (BSEC) did not approve the proposal for FCS Holdings Ltd to acquire the shares of Yeakin Polymer held by the company's sponsor directors because the required No Objection Certificates (NOCs) for defaulted loans were not provided.

According to BSEC sources, the application was rejected because the applicants failed to submit the required No Objection Certificates (NOCs) from the relevant banks and financial institutions regarding the company's defaulted loans. Yeakin Polymer currently has outstanding loans of around Tk52 crore with banks and financial institutions.

Sources said FCS Holdings had sought approval from the commission to acquire a significant number of shares from the sponsor-directors of Yeakin Polymer. Under the plan, the share transfer would have enabled FCS Holdings to become a major shareholder in the company.

However, during the review process, the regulator found that Yeakin Polymer has defaulted loans with Islami Bank Bangladesh and Industrial and Infrastructure Development Finance Company Ltd (IIDFC). In such cases, obtaining consent from the lending institutions is mandatory before any transfer of sponsor-directors' shares can proceed.

The applicants failed to collect and submit the necessary NOCs from the lenders to the commission. As a result, the BSEC cancelled the application.

However, the commission has not completely closed the matter. Instead, it has instructed FCS Holdings to submit a fresh application along with NOCs related to the rescheduling of the company's bank loans.

This means that if the concerned banks and financial institutions agree to reschedule the loans or provide consent regarding the liabilities and issue the necessary NOCs, FCS Holdings may reapply to the commission seeking approval to acquire the shares.

Mohammad Harunor Rashid, managing director of Yeakin Polymer stated that they have already obtained No Objection Certificates (NOCs) from financial institutions- IIDFC for loans totaling Tk9 crore. However, the NOC from Islami Bank, which involves a loan of Tk43 crore, has not yet been received, though they expect to get it soon. The bank is currently assessing how it will recover its loan.

He also mentioned that the Bangladesh Securities and Exchange Commission (BSEC) has not directly rejected their application. Instead, BSEC has asked them to submit a new application along with the required NOCs. Once they receive the remaining NOC, they will submit the application promptly. 

Infograph: TBS

According to regulatory sources, FCS Holdings and three sponsor-directors of Yeakin Polymer jointly applied to the commission last September seeking approval to transfer 1,58,52,993 shares, representing about 21.50% of the company's total shares, to FCS Holdings.

The shares were to be transferred from Yeakin Polymer's chairman Chakladar Rezaunul Alam, director Kapita Packaging Solutions Ltd, and director Didarul Alam.

During the review process, the securities regulator asked the applicants to submit NOCs from the lenders due to the company's outstanding loans and financial obligations with multiple institutions.

However, the applicants were unable to provide the required approvals within the stipulated timeframe, prompting the commission to cancel the proposal and instruct them to submit a fresh application with the necessary lender approvals if they wish to proceed.

BSEC Officials familiar with the matter said that regulatory approval for such transfers is subject to ensuring that the interests of lenders and other stakeholders are protected, particularly when the shares involved are linked to outstanding liabilities.

Under the proposed arrangement, FCS Holdings planned to acquire the shares without making any direct cash payment to the selling sponsors. Instead, the company intended to assume responsibility for settling certain financial obligations of Yeakin Polymer, including bank loans and outstanding supplier payments.

Sources said the plan was part of a broader strategy to restructure the finances and management of the struggling polymer manufacturer.

If approved, the transaction would have allowed FCS Holdings to become a major shareholder and potentially play a key role in reviving the company's operations. The plan also included restructuring the board of directors, with representatives of FCS Holdings expected to join the board after the share transfer. However, the lack of lender consent halted the process.

Market analysts note that when shares are pledged against bank loans or linked to corporate liabilities, obtaining lender approval is essential. Without such consent, regulators generally do not allow ownership changes to proceed. Yeakin Polymer, a publicly listed company, has been facing business and financial challenges in recent years.

The company raised Tk20 crore from the capital market through an initial public offering (IPO) in 2016 to expand its operations. However, its performance declined after government policies encouraged the use of environmentally friendly jute sacks instead of polymer bags for agricultural packaging, reducing demand for the company's core products.

Since listing, Yeakin Polymer has struggled to maintain profitability and declared only a 1% cash dividend once after its IPO, reflecting weak financial performance.

Due to prolonged operational challenges and failure to meet certain listing requirements, the company has also been placed in the Z category on the stock exchanges.

The proposed takeover by FCS Holdings initially drew attention from investors who hoped the change in ownership could revive operations and improve the company's financial condition.

But with the commission cancelling the proposal due to incomplete documentation, the future of the planned takeover remains uncertain.