Southeast Bank to auction New Line Clothings' assets over Tk424cr default loan

Infographics: TBS

Southeast Bank PLC has initiated measures to recoup more than Tk424 crore in defaulted loans from New Line Clothings Ltd, a listed apparel manufacturer that has ceased operations in recent years.

The bank announced an auction of New Line's mortgaged properties after declaring the loan as defaulted, according to a notice issued on 17 September.

The Banani branch of Southeast Bank reported that as of 18 August, the outstanding loans of New Line Clothings stood at Tk424.12 crore.

The bank invited bidders to participate in the auction by 30 September, through which it seeks to sell the company's mortgaged properties – 112 decimals of land in Gazipur and a seven-storied factory building — to recoup its losses.

Efforts to contact Zakir Chowdhury, managing director and CEO of New Line Clothings, were unsuccessful, as his phone remains switched off.

Meanwhile, a former officer of the company, requesting anonymity, revealed that New Line Clothings had been struggling with a severe shortage of working capital.

"The failure to meet loan instalments has put the company in a precarious position. With no funds to sustain operations, the factory has remained inactive for years," the former official said.

New Line Clothings, which has maintained a banking relationship with Southeast Bank since 2007, has borrowed both long-term and short-term loans over the years.

Its financial troubles mounted despite raising Tk30 crore through an initial public offering (IPO) in 2019, which was intended to partly repay Southeast Bank loans and finance the acquisition of new machinery.

At the time of its listing, the company's total borrowings from Southeast Bank already stood at Tk123 crore. Notably, Southeast Bank Capital, a subsidiary of the bank, was also one of the issue managers of the company's IPO.

The company's financial performance began deteriorating soon after its market debut. New Line Clothings has failed to disclose any financial results since March 2022 and has not declared a dividend since the 2020–21 fiscal year, when it last paid a 12.25% cash dividend on profits of Tk12.79 crore.

The concerns surrounding New Line Clothings deepened in April this year when a DSE inspection team, approved by the Bangladesh Securities and Exchange Commission (BSEC), visited both the company's head office and factory, only to find them shuttered.

According to a senior DSE official, multiple complaints had been filed by investors alleging that the company had effectively ceased operations without notifying the market.

In addition to the absence of financial reporting, the company failed to hold its annual general meeting (AGM) for three consecutive years, further breaching regulatory requirements and deepening investor concerns. This breaching requirement prompted the DSE to downgrade the company to the "Z" category, reserved for non-compliant or troubled firms.

The market performance of New Line Clothings' shares reflects its decline. In August 2024, the company's share price traded at Tk45.40, but as of the last trading session on Thursday, it had plummeted to just Tk5.90 – well below its face value of Tk10.

Its current market capitalisation stands at Tk46.33 crore, against a paid-up capital of Tk78.53 crore.

The company has also not updated its shareholding information since December 2023. At that time, sponsors and directors collectively held 30.61% of shares, institutional investors 18.33%, and the general public 51.06%.

The absence of updated data has further fueled uncertainty among investors, many of whom fear that they have little chance of recouping their investments.