Bashundhara Multi Steel in limbo as eligibility dispute stalls Tk1,765cr financing

Infographic: TBS

A financing dispute has put a steel project initially estimated at Tk4,146 crore in the Mirsarai Special Economic Zone in limbo, with Tk1,765 crore of an approved loan still undisbursed and around 275 containers of machinery stranded at Chattogram Port.

Bashundhara Multi Steel Industries Ltd was established in 2021 to develop the 12.5-lakh-tonne-a-year plant.  The plant was originally scheduled to begin commercial production in July 2025, but it has yet to start operations.

Only Tk540 crore of a Tk2,305 crore syndicated loan approved by eight commercial banks has been disbursed so far, according to company officials.

The remaining Tk1,765 crore has yet to be released, making it difficult for the company to complete construction, clear imported capital machinery and keep the project on schedule, they said.

The company has estimated that the delay has sharply increased the project's cost by nearly 72% since 2021.

Financing dispute at the centre
The impasse centres on whether Safwan Bashundhara Global, the project's sponsor, should be treated as a separate corporate entity from Bashundhara Group for lending purposes.

The company says Safwan Bashundhara Global is an independent business group with separate financial records and Credit Information Bureau records. The Bangladesh Bank, however, says its position is based on provisions of the Bank Company Act concerning companies linked through common directors when one of the related entities has defaulted loans.
Md Anwarul Islam, managing director and chief executive officer of Agrani Bank, the lead bank of the syndicated facility, said disbursement was halted following a directive from the Bangladesh Bank.

"According to the Bank Company Act, if any company is marked as a loan defaulter, the owner's other company cannot get a loan," he said.

He said the Bangladesh Bank could provide a remedy under the Bank Company Act for export-oriented businesses or special cases. If the central bank issues a further direction after considering the Bashundhara project, the bank would disburse the loan, he added.

Bangladesh Bank Executive Director and spokesperson Md Arief Hossain Khan said under the Bank Company Act, if a company has defaulted loans, other companies owned by the same directors cannot receive loans.

He said the central bank remains concerned about the investment in the project and that the company could approach the regulator for consideration under the applicable legal framework.

Machinery stranded at port
Around 275 containers carrying capital machinery for the project remain at Chattogram Port, according to company officials.

The machinery is valued at approximately Tk534 crore, while accumulated port charges and other costs associated with the prolonged detention have reportedly pushed the overall financial burden close to Tk950 crore.

The company says the machinery has remained uncleared for around two years. It estimates that the resulting delay could extend the project's implementation timeline by another 18 months.

The company had sought an 18-month extension, but 12 months have already elapsed while waiting for approval, leaving limited time to complete the project. Four of the banks participating in the syndicated facility have also yet to extend the financing period, according to the company.

As the machinery remains at the port, demurrage and other related costs continue to accumulate.

Sahed Jahid, chief operating officer of Safwan Bashundhara Global, said the company had already invested more than Tk1,000 crore in the project before construction slowed because of financing constraints.

"Every additional delay increases project costs, weakens financial viability and places greater pressure on investors and lenders," he said.

Jahid said the company had submitted documents to demonstrate that Safwan Bashundhara Global is a separate corporate entity and maintains separate CIB records.

"We are a totally different entity. We have an updated CIB report, but the central bank did not consider us separately, which has affected a huge investment," he said.

The company maintains that neither Bashundhara Multi Steel Industries nor Safwan Bashundhara Global has financial liabilities connected to Bashundhara Group and that the two companies should therefore be assessed independently for financing purposes.

Project cost soars
Meanwhile, the project's estimated cost has risen sharply because of currency depreciation, higher borrowing costs and global disruptions.

According to Jahid, the estimated project cost has increased from Tk4,146 crore in 2021 to Tk7,118 crore in 2026.

The company attributes much of the increase to the depreciation of the taka. When the syndicated loan was initially approved, the US dollar was trading at around Tk86, compared with approximately Tk123 currently, substantially increasing the taka cost of imported machinery and foreign currency obligations.

Jahid said the Covid-19 pandemic, global supply chain disruptions following the Russia-Ukraine war and the depreciation of the taka had all contributed to the increase in implementation costs.

He said nearly half of the construction work had been completed before financing constraints brought progress to a standstill.

The company also said its lending rate had increased from around 9% to approximately 15.55% over the past 18 months.

With the plant yet to enter commercial production, the project is incurring financing costs without generating operating revenue. The company therefore needs additional funding to complete construction and clear the machinery, while the prolonged delay is simultaneously increasing interest, demurrage and other project costs.

Large industrial investment at risk
The project is being developed on around 70 acres inside the Mirsarai Special Economic Zone. Once operational, the plant is expected to produce 1.25 million tonnes of steel annually and create around 3,000 direct jobs, according to company officials.

It is also intended to manufacture rebar coils and wire rods, products that Bangladesh currently imports in substantial quantities.

The financing impasse also creates risks for the eight banks participating in the syndicated facility, said the company officials. A partially completed industrial project with imported machinery held at a port and rising debt-servicing costs could become increasingly difficult to bring into commercial operation if the deadlock continues, they said.