A silver lining seems to have appeared in front of Navana Group at last.
Once an epitome of industry and ambition, Navana Group has in recent years fallen on hard times. So acute is its cash crunch that in 2018 it applied to the government for debt restructuring.
The government has now answered its pleas, with as many as 31 banks have started the process to restructure the business giant's entire debt amounting to Tk 5,203 crore.
This will be the largest debt restructuring programme for a single entity.
Besides, four state-owned banks -- Sonali, Janata, Agrani and Rupali -- will also provide loans amounting to Tk 500 crore in the form working capital such that the entity can run its businesses smoothly.
Working capital is a short-term loan whose maximum repayment tenure is one year.
The state lenders may sanction Tk 125 crore each within the next few days under the central bank's stimulus package of Tk 33,000 crore for large business entities to help them tide over the current challenging trading conditions brought on by the global coronavirus pandemic.
Agrani will submit the final proposal before its board tomorrow, according to its Managing Director Mohammad Shams-Ul Islam.
Janata Bank may sanction the loan on Wednesday and Rupali Bank on Thursday.
Sonali Bank will also submit the issue to its board immediately, said its Md Ataur Rahman Prodhan.
Navana Group, one of the largest business groups in the country, has been facing a deep financial crisis due to its mismanagement and inefficiency for the last three to four years, said bankers.
Until last year, the group's total liabilities stood at Tk 4,503 crore in 31 banks and nearly Tk 700 crore in 22 non-bank financial institutions (NBFIs), according to a finance ministry document.
The group, which began its journey in 1953, now has 27 concerns, ranging from real estate to furniture, automobile to petroleum and energy products, battery and electrical and electronics to food and beverage.
Its financial problems come to the surface on 3 December 2018 when its Chairman Shafiul Islam Kamal applied to the finance ministry for restructuring its debts with the 53 financial institutions.
AMA Muhith, the then finance minister, accepted the proposal positively and discussed it with the managing directors of state lenders and top officials of the ministry in a meeting on 19 December that year.
The finance ministry subsequently arranged several meetings with the central bank and state lenders to explore ways on how to salvage the group.
The ministry arrived at two solutions at last on 13 February.
The first option is to restructure the debt amounting to Tk 4,503 crore given by 31 banks, with the four state lenders taking over the loans amounting to Tk 700 crore from the 22 NBFIs.
Besides, a pari-passu charge will have to be created to secure the fresh loans to be given out by the state lenders as Navana does not have available collateral securities.
Pari-passu means "equal footing" that describes situations where two or more assets, securities, creditors, or obligations are equally managed without preference.
The second option entails the four state lenders and nine private banks, which gave out Tk 2,252 crore to the group, will take over the loans collectively from the NBFIs.
Navana Group will not have to give any down payment for restructuring the loans.
The banks will have to take approval from their respective boards and the central bank in tandem to implement the financial rescue programme, according to the ministry document.
Creating the pari-passu charge is difficult immediately as there are many banks involved in the process, said Md Abdus Salam Azad, managing director of Janata Bank.
But a good number of private banks now oppose the creation of the pari-passu charge as they will have to share their collateral securities with the state lenders, said a high official of one of the private banks involved with the matter.
"Despite that, we will resolve the matter promptly to give out the working capital in the quickest possible time," Azad said.
Banks are now assessing the appropriate clauses of the two plans for the implementation of the rescue package as per a decision of a meeting held in the second week of July.
The managing directors of the state lenders, top officials of both the finance ministry and the central bank took part in the meeting.
Earlier in June, the central bank had arranged another meeting where senior officials of the 22 NBFIs and the banks concerned participated.
The central bank asked Arif Khan, managing director of IDLC Finance, to coordinate the NBFIs such that the banks will take over the loans from them within the shortest possible time.
The majority of the NBFIs have already submitted their details to the central bank and the rest may be placed this week, Khan said.
Navana Group will get relief from the burden of the high interest charged by the NBFIs if banks will take over the loans, he said.
NBFIs have not been asked to follow the 9 per cent interest cap on lending as they have to mobilise funds from banks; they now charge a minimum interest of 11 per cent on lending.
Asked whether NBFIs would rebate the interest to the group, Khan said there would be no scope to take a collective decision to this end.
The respective board of the NBFIs would decide on whether they will rebate the interest or not, he added.
As per the finance ministry proposal, banks will only take over the principal amount and the NBFIs could either rebate the interest or recover the funds from Navana.
The state lenders may take over the loans alone as private banks are reluctant to do so, said a high official of a state lender wishing not to be named as he is not authorised to speak with the media.
"Our initial priority is to provide the working capital to the group immediately. Taking over the loans from the NBFIs is a secondary issue," said the Agrani MD Islam.
Bank Asia, which lent about Tk 250 crore to the group, is considering reconstructing the loans, said its MD Md Arfan Ali.
Contacted, Md Serajul Islam, spokesperson and an executive director of the central bank, said: "The Bangladesh Bank is now analysing both the asset and liabilities of the group before giving its approval to the restructuring proposal."
The Daily Star could not reach the Navana Group chairman yesterday for his comment on the matter. He is said to be unwell.