Banks form review committee to assess City Group’s Tk26,600cr loan restructuring plan
The committee is expected to submit its report to bank CEOs within around 10 days
Banks have decided to appoint an independent auditor and form a review committee comprising senior bankers to assess the financial condition of City Group before taking any final decision on restructuring the conglomerate's more than Tk26,600 crore outstanding loans.
The decision was taken at a meeting held at Hotel Sonargaon in Dhaka today (18 June), where top executives from more than a dozen banks gathered to discuss ways to support City Group, one of the country's largest industrial conglomerates, amid its ongoing financial difficulties.
A managing director of a bank told The Business Standard that City Group presented its future business plans during the meeting.
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However, no final decision was taken regarding loan restructuring.
"The banks have shown a positive attitude towards supporting City Group, but before any restructuring decision, an independent audit will be conducted to assess the group's actual financial and business position," the official said.
He added that a review committee comprising representatives from the lending banks has also been formed to evaluate the group's overall situation and financing needs.
According to the bankers, City Group informed the meeting that it is considering selling some of its non-core businesses as part of efforts to stabilise operations and improve liquidity.
The review committee is expected to prepare recommendations, based on which the banks will formulate a proposal and seek necessary support from Bangladesh Bank.
Bankers attending the meeting described City Group as a "genuinely distressed" borrower rather than one involved in fund diversion or capital flight.
"Although the group is under financial pressure, there is no indication that money has been siphoned abroad. For that reason, banks are broadly supportive of efforts to revive the business," the official said.
Committee to report within 10 days
Speaking to TBS after the meeting, Mashrur Arefin, managing director and CEO of City Bank and chairman of the Association of Bankers Bangladesh, said, "It was a very good meeting. A threadbare analysis was conducted. Then a committee comprising 12–13 senior bankers, including deputy and additional managing directors, was formed," he said.
According to Mashrur Arefin, the committee will assess City Group's financing requirements, evaluate the extent of support individual banks can provide and conduct due diligence regarding any potential working-capital bridge financing.
The committee is expected to submit its report to bank CEOs within around 10 days, after which the lenders plan to approach Bangladesh Bank.
He also said ABB will request the central bank to temporarily suspend the regulatory requirement to classify City Group's loan accounts as of 30 June.
"We will seek a one-off regulatory dispensation for this specific case," he said.
Banks considering syndicated restructuring framework
Earlier, TBS reported that 36 banks, including two foreign banks, are considering a syndicated restructuring framework for City Group's loans, which currently exceed Tk26,600 crore.
The objective is to keep the group's business operations running while avoiding a sharp increase in provisioning requirements across the banking sector.
Under the proposed framework, banks would restructure the loans and extend repayment periods rather than immediately classifying them as non-performing.
Banking sources said the loans have not yet been classified, and lenders were awaiting the outcome of Thursday's meeting before making any final decision.
Founded more than five decades ago, City Group generates annual revenue of around Tk32,000 crore and employs approximately 25,000 people.
As part of the proposed restructuring plan, banks are also considering placing representatives on the group's board to strengthen oversight and ensure greater transparency regarding cash flows, expenditures and sales proceeds.
The lenders are discussing a structure based on international debt-restructuring practices, including a "waterfall mechanism" under which all sales proceeds would flow into a jointly controlled escrow account before being allocated between working capital needs and loan repayments.
Under the model being considered, a portion of incoming cash flows would be returned to the company to support operations, while the remainder would be reserved for debt servicing.
