City Group’s Tk1,700cr loan deal likely Thursday; payouts begin 8 Nov as cenbank relaxes rules

Bangladesh Bank has exempted five defaulting City Group companies from a lending restriction until 31 December 2027, allowing a City Bank-led consortium to provide up to Tk3,000 crore in working capital loans, with Tk1,700 crore agreed in the initial phase.

A consortium of eight banks is set to sign an agreement on Thursday (5 November) to provide Tk1,700 crore in fresh working capital loans to five defaulting companies of City Group, following a special exemption from Bangladesh Bank.

Disbursement is expected to begin on Sunday (8 November), depending on the group’s requirements.

The financing is part of a syndicated working capital facility of up to Tk3,000 crore, with City Bank acting as lead arranger and Mutual Trust Bank as co-arranger.

The eight banks have committed Tk1,700 crore in the first phase, while the arrangers expect to raise the remaining Tk1,300 crore as more banks join the consortium.

Of the initial commitment, City Bank will provide Tk300 crore, while Dutch-Bangla Bank, Mutual Trust Bank, NCC Bank, Prime Bank, Pubali Bank, Southeast Bank and Trust Bank will contribute Tk200 crore each.

Mashrur Arefin, managing director and CEO of City Bank, earlier told The Business Standard that the bank would provide Tk300 crore, while the other seven banks would contribute Tk200 crore each.

Arefin said the coordinated financing effort, with the guidance and support of Bangladesh Bank and the government, was aimed at keeping essential supplies flowing and sustaining the wider economy.

“I believe that coordinated action of this kind by the banking sector, with the guidance and support of Bangladesh Bank and the Government, is the most responsible way to keep essential supplies flowing and sustain the wider economy. We need to stand by our customers not only when everything is going good for them but also when they are facing dire challenges due to many reasons. This is the first step which will make sure that this business house thrives again,” he said.

Arefin earlier told The Business Standard that the loan agreement was expected to be signed by 5 November, with disbursement scheduled to begin on 8 November based on the group’s requirements.

In a circular issued today (4 November), Bangladesh Bank’s Banking Regulation and Policy Department-2 granted a special exemption under Section 27Ka(3) of the Bank Company Act 1991.

The exemption allows five City Group companies to receive syndicated working capital facilities of up to Tk3,000 crore from the consortium led by City Bank until 31 December 2027.

The companies are City Seed Crushing Industries Ltd, City Sugar Industries Ltd, City Edible Oil Ltd, City Dal Mills Ltd and Shampa Flour Mills Ltd.

Under Section 27Ka(3), banks are generally barred from extending fresh credit to defaulting borrowers. The central bank’s special exemption allows the consortium to provide the working capital facility despite the companies’ default status.

The financing is intended to support raw material imports ahead of Ramadan. The arrangers are confident that the remaining Tk1,300 crore will be raised as additional banks join the consortium.

Source: The Business Standard