Auditor to assess City Group; banks' review body to decide debt restructuring
The committee is expected to submit its report to bank CEOs within around 10 days.
Highlights
- Banks to appoint an independent auditor to assess City Group's finances
- A review committee of senior bankers has been formed
- Committee to report back to Bank CEOs within about 10 days
- BB to be approached after getting the report
- No final decision on loan restructuring yet
Banks have decided to appoint an independent auditor before moving forward with any restructuring of City Group's loans. A review committee comprising representatives from leading banks have also been formed, according to a managing director of a bank who attended a meeting on the matter.
Senior bankers from more than a dozen banks met at Hotel Sonargaon in Dhaka today (19 June) to discuss ways to keep City Group operational and consider a joint restructuring of the conglomerate's outstanding loans, which exceed Tk26,600 crore.
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A managing director present at the meeting told The Business Standard that City Group presented its future business plans during the discussion. However, no final decision was made on loan restructuring, although participating banks expressed a positive attitude towards supporting the group.
"The meeting decided to appoint an independent auditor to assess City Group's current financial and business condition. In addition, a review committee has been formed with representatives from the banks to evaluate the overall situation," he said.
He added that City Group informed the meeting it plans to sell some of its non-core businesses in order to sustain operations.
According to the banker, based on the review committee's findings, the banks will prepare a specific proposal and meet with the Bangladesh Bank governor to seek the central bank's support.
"All participants agreed that City Group is facing a genuine business crisis. Although its operations are under pressure, it has not siphoned money abroad. Therefore, all banks agreed on the need to help revive the company," he said.
The loans have not yet been classified, and bankers said they were awaiting the outcome of yesterday's meeting before taking any final decision.
Established more than five decades ago, City Group generates annual revenue of around Tk32,000 crore and employs approximately 25,000 people.
To ensure transparency regarding cash flows, expenditures and sales, banks plan to place representatives on City Group's board of directors. If all 36 banks agree, they will nominate two or three representatives to sit on the board.
The restructuring framework is being designed based on global debt restructuring practices and a "waterfall mechanism."
Commenting on the meeting, Mashrur Arefin, managing director and CEO of City Bank and chairman of the Association of Bankers, Bangladesh (ABB), told TBS, "All banks participated. It was a very good meeting. A threadbare analysis was conducted. Then a committee comprising 12-13 senior bankers or DMDs/AMDs was formed."
He said the committee will assess City Group's financing requirements, the level of support needed, the capacity of individual banks and carry out due diligence for any bridge financing required for working capital.
"The committee will report back to the CEOs within about 10 days so that we can approach Bangladesh Bank," he said.
Arefin added that the ABB will request Bangladesh Bank to temporarily suspend, for this specific case, the regulatory requirement to classify any of City Group's loan accounts as of June 30.
"In other words, we will seek a one-off regulatory dispensation," he said.
