• Friday, September 19, 2014

Mostafa Group seeks to reschedule loans at 5pc down payment

Banks to place its proposals at their boards

Sajjadur Rahman

Mostafa Group, which owes more than Tk 1,400 crore to around 40 banks and financial institutions, has proposed to reschedule the loans by making a 5 percent down payment although the regulatory requirement is 15 percent.

The company also sought interest waiver and nine years' time to repay the loans.

The debt-ridden conglomerate came up with the proposal last week after a series of meetings with its lenders. The last meeting was held on July 15.

“We are trying our best to repay the loans,” Shafique Uddin, vice chairman of the group, told The Daily Star. He said they have already written to respective banks and other lenders.

Several top bankers told this correspondent that they will now take the proposal of Mostafa Group to their boards for approvals. Then the banks will have to take permission from the central bank, which has a rule that a loan can be rescheduled with down payments at 15 percent of the total default loans.

“We can't say anything on the proposal until it is vetted by our board,” said Ali Reza Iftekhar, managing director of Eastern Bank and president of Association of Bankers Bangladesh that has been mediating between Mostafa Group and the lenders for more than a year.

Some bankers said Mostafa's case is a different one. “This is an exceptional case and the borrower is in real trouble. We hope the central bank will relax the rescheduling rules for them,” said a chief executive officer of a private bank, to which the company owes more than Tk 100 crore.

The CEO said it must be a 'win-win outcome' for both the parties, otherwise the banks will plunge into crisis and their profits will be affected in meeting the loan-loss provision.

The 62-year-old company came under the spotlight last year after around 30 banks and 10 non-banks found it difficult to recover the loans from the conglomerate. All these loans have become defaulted.

The Chittagong-based company owes the highest amount -- Tk 300 crore -- to National Bank Ltd, while Pubali Bank's exposure is more than Tk 100 crore, Prime Bank's Tk 57 crore, Mutual Trust Bank's Tk 37 crore and City Bank's Tk 17 crore.

Some of the banks alleged that Mostafa Group had bought huge lands by diverting funds from bank loans.

“Mostafa Group's proposal must be acceptable to our board. But it is tough for us to reschedule the loans for nine years,” said MA Mannan, managing director of Islami Bank that has around Tk 130 crore exposure to the debt-ridden group.

The late Mostafizur Rahman of Chittagong founded Mostafa Group in 1952. Initially it was engaged in commercial trading and export and import. Later, it started manufacturing steel products, iron and MS rod and got involved in ship breaking, artificial leather making, and shrimp cultivation, processing and export.

The group also has business in textile and readymade garments, paper, refined palm and soybean oil, coconut oil, iodised salt, tea, rubber plantation, transport, IT and the financial sector.

“The group lacked professionalism and depended heavily on accounting employees who caused its downfall,” said a managing director of a first-generation private bank quoting the owners of the company. He said, once Mostafa Group was a very good client and every bank wanted it as their client.

Owners also told the bankers that they had incurred huge losses during the last caretaker government regime, when many commodity importers were forced to sell their goods below their costs to keep the market stable.

Published: 12:01 am Tuesday, August 05, 2014

Last modified: 9:52 pm Tuesday, August 05, 2014

TAGS: payment financial institutions Mostafa Group loans Association of Bankers Bangladesh

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