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TUESDAY, JUNE 10, 2025
How Bangladesh Services plans to come out of its dire strait

Stocks

Rafiqul Islam
26 June, 2023, 01:35 pm
Last modified: 26 June, 2023, 10:29 pm

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How Bangladesh Services plans to come out of its dire strait

Rafiqul Islam
26 June, 2023, 01:35 pm
Last modified: 26 June, 2023, 10:29 pm
How Bangladesh Services plans to come out of its dire strait

InterContinental Dhaka owner Bangladesh Services Limited has asked its lender Agrani Bank to meet it halfway in alleviating the company's burden of loan it had taken to finance the hotel's renovation. 

About a decade ago, the state-owned hospitality firm borrowed nearly Tk574 crore from Agrani Bank for renovating the InterContinental Dhaka as per the InterContinental Hotel Group (Asia Pacific) standards. 

Thanks to interest charges, the loan amount has now swelled up to more than Tk900 crore increasing the firm's finance costs and eventually throwing the company into losses. 

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Now, in a move to ease its hardships, Bangladesh Services has come up with ways how its lender can help it reduce this debt burden, and has already written to the bank and sat with its officials in this regard. 

The company's ask

The company's Managing Director Mohammad Atiqur Rahman told The Business Standard, "We have applied to the bank for; time extension, reduction of interest rate to 8% from 11.5%, instalment payment under the balloon method as per our earning capacity, and payment of grace period interest at a later stage of the repayment period."

Under the balloon method, the borrower pays much smaller monthly payments until the lump sum principal balance at the end of a loan term is due.

In simpler words, the company proposed the bank to halt the charging of interest on the total loan amount and charge interest on the principal loan amount only. 

"As per the proposal, interest will be charged on the principal if the bank agrees. And no interest will be charged on the interest accrued. The accrued interest will be paid along with principal loan instalments," said an official at the company's  finance department.

If the bank agrees to the proposal, the interest and loan repayment pressure on Bangladesh Services will significantly decline, the official added.

What birthed the dire strait

According to company officials, heavy spending on renovation works is what pushed the company into losses. In order to finance these works, the company took the loan from Agrani Bank. 

The renovation cost was Tk732 crore, of which, around 80% was funded by the loan and the rest by the company's own money. 

Consequently, the state-owned company fell deep into losses and has not been able to get its profitability back till date. 

Atiqur Rahman blamed depreciation and interest charges for the company's losses, adding that the firm's revenue has been growing. 

"We are exploring various avenues to increase the business. In the meantime, we have secured certain room businesses, while some are on the pipeline."

"We have also taken various cost savings measures to earn higher profit. As per our projection, the company will be able to repay its loan by 2042," the managing director added.

Jul-Mar FY23 performance

Bangladesh Services has reported 64% higher revenue of Tk127 crore in the first nine months of the fiscal 2022-23, compared to the same period previous fiscal. Its losses have reduced from Tk74.86 crore to Tk29.92 crore year-on-year. 

The company says hotel business was sluggish due to the aftermath of the Covid-19. Now, the hotel occupancy is rising. But the business would have been higher if the Ukraine war did not happen.

Till this March, its accumulated losses stood at Tk512.16 crore, which was Tk481.62 crore in June 2022. 

Bangladesh Services has been publicly listed since 1984. 

Bangladesh Services Limited / Bangladesh Services Limited (BSL)

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