Beximco sukuk's tenure proposed for 6-year extension to avert default

Highlights:

• Bangladesh Bank recommends extending Beximco sukuk maturity until 2032
• Extension aims preventing default and protecting institutional investors' funds
• Sukuk profit rate may rise above current 9% level
• Korotoa Solar Park damaged during 2024 political unrest and fire
• Banks hold 97% of sukuk, raising financial sector concerns
• Teesta Solar Plant revenues expected supporting full investor repayment

A high-powered committee led by the Bangladesh Bank has recommended extending the maturity of Beximco Ltd's Tk3,000 crore green sukuk by six years to 2032, instead of its scheduled maturity in December 2026, to avoid a potential default and protect institutional investors heavily exposed to the instrument.

The recommendation was finalised at a meeting held at the central bank yesterday under the leadership of Deputy Governor Md Kabir Ahmed, where the committee reviewed the feasibility of restructuring the terms and conditions of the "Beximco Green Sukuk Al Istisna".

The proposed extension remains subject to approval by the Bangladesh Securities and Exchange Commission, which has regulatory authority over bond approvals, tenure extensions and changes to profit rates.

Officials familiar with the discussions said the existing 9% profit rate on the sukuk could increase by around 1 to 1.5 percentage points following the extension, linked to the yield on five-year treasury bonds. The current yield on five-year government treasury bonds stands at 10.78%.

Infograph: TBS

Cenbank moves to prevent default

The decision follows months of discussions within two separate committees formed to examine the sukuk's restructuring.

Earlier, a Bangladesh Bank high-level committee and a separate 21-member working committee led by the Investment Corporation of Bangladesh, the trustee of the sukuk, had discussed extending the instrument's tenure.

However, officials said the central bank committee has now reached a final decision in favour of extending the maturity period.

Under the proposed arrangement, the ICB will formally inform the securities regulator of the committee's decision and initiate the required process for obtaining approval for the extension.

Officials at the meeting said the trustee would not inject additional funds to complete the partially developed Korotoa Solar Park, which had been financed through the sukuk's sinking fund.

The project suffered severe damage during political unrest surrounding the change in government in August 2024, when machinery and transformers at the solar park were burned, preventing the project from being connected to the national transmission grid.

According to officials, approximately Tk150 crore will now be required to make the project operational.

However, Beximco or a third-party investor may still revive the project with fresh investment. Any new investment would be recoverable only after sukuk investors are fully repaid.

Institutional investors heavily exposed

An official present at the meeting said Beximco Ltd's operations had effectively come to a halt following the political transition last year, making it impossible for the company to repay investors within the current maturity period ending in December 2026.

He said around 97% of the sukuk investors are institutional investors, primarily banks and bank subsidiaries. Failure to repay investors on time would place significant pressure on the banking sector, as banks could face provisioning requirements if the instrument were to fall into default.

"Considering the overall situation, the committee decided to extend the maturity period," the official said.

According to ICB's calculations, the Teesta Solar Plant financed through sukuk proceeds is currently supplying 200MW of electricity to the national grid and generating around Tk50 crore in monthly revenue.

Of that amount, approximately Tk7 crore is paid to Beximco as operational expenses, while the remaining revenue is used for periodic profit payments and contributions to the sinking fund.

Based on these cash flows, officials estimate that the sukuk, which has around Tk2,800 crore outstanding now, could generate around Tk3,600 crore in revenue over an additional 72 months.

ICB estimates also show that approximately seven months remain before the current maturity period expires. During this period, the project is expected to generate around Tk350 crore in additional revenue, while nearly Tk600 crore has already accumulated in the sinking fund.

Officials believe these funds, combined with cash flows generated during the extended tenure, would allow full repayment to investors within the revised maturity period.

Delays and project setbacks

Bangladesh Bank formed a 10-member committee last year to review and restructure the sukuk's terms. The committee included senior officials from Bangladesh Bank, ICB, the Bangladesh Securities and Exchange Commission, the Bangladesh Power Development Board and several leading banks.

The country's first asset-backed Shariah-compliant corporate green sukuk was issued by Beximco Ltd in 2021 and raised Tk3,000 crore.

Banks and their subsidiaries invested Tk2,439 crore through private placements, while Tk558 crore was raised through public offerings.

Of the total proceeds, Tk2,155 crore was ultimately spent on the Teesta Solar Plant against an original allocation of Tk1,886.83 crore. Another Tk39 crore was spent on the Korotoa Solar Project against an allocation of Tk308.31 crore, while Tk806 crore was used for textile expansion.

The Korotoa plant, planned as a 30MW solar project, had been expected to begin operations by June 2026. However, a fire during the August 2024 unrest damaged its transformers and site office, delaying implementation further.