International Leasing eyes conversion of Tk2,000cr equity

Scam-hit International Leasing and Financial Services Limited has decided to offer company ownership to its depositors and lenders.

The non-bank financial institution (NBFI), allegedly looted and devastated by PK Halder and his associates, owes around Tk4,300 crore to its depositors and lenders and is struggling to pay back. It is going to offer company shares against at least half of the liabilities, according to Md Mashiur Rahman, managing director (current charge) of International Leasing.

"We are expecting around Tk1,700 crore liabilities to our institutional lenders and depositors will be converted to equity, while some Tk300-500 crore should be converted by individual depositors," he told The Business Standard.

Responding to a question, he said if the equity conversion target is achievable, then the targeted equity would strengthen the company's capital base, and help fund flow matching to come back in its regular NBFI business – a must for the firm to pay back.

Many of the lenders and depositors expressed their verbal interest to opt-in into the equity conversion programme as they believe this should be the best way to be paid back, said Mashiur Rahman, adding that the entire plan is subject to the approval of the Bangladesh Bank and the Bangladesh Securities and Exchange Commission (BSEC).

The NBFI, on Wednesday, appointed local merchant bank Sonar Bangla Capital Management as the corporate advisor and issue manager to actuate its revival roadmap.

In mid-2020, a high court-appointed board led by former bureaucrat Md Nazrul Islam Khan took over the financial institution to recover as much as the company assets from defaulting clients, mostly because of the scam loans during the influence of PK Halder.

Without liquidity, the NBFI had been failing to pay back clients on the maturity of deposits.

Alongside maximising recovery, the NBFI under the new management also has been trying to pay back as much as depositors, which helped it secure some new deposits too, said Mashiur Rahman.

However, neither the recovery nor the payback has been near enough as a part of the total.

The managing director (current charge) said two figures increased his optimism about the International Leasing's survival – it already has sued borrowers to recover around Tk2,600 crore and over Tk1,600 crore deposits got term extensions.

The NBFI has no provision shortfall as it already has provisioned a gigantic sum of Tk3,500 crore against its non-performing loans which is nearly 80% of the firm's entire loan book, said Rahman.

The new board had been trying to salvage funds from the government or the central bank to speed up repayments, but it was yet to get any response.

International Leasing, following its equity enhancement, might plan for bond issuance for liquid money.

"We are expecting the needed support of the Bangladesh Bank, the BSEC, the government, the depositors, lenders, borrowers and of course the shareholders. Any lack of it would be a loss-loss proposition."

Due to the huge provisioning amid the lack of new businesses, International Leasing has been posting huge losses since 2019.  

Its net asset value against each share having a face value of Tk10 sank to a negative Tk154.19, which means the firm's liabilities are 15 times bigger than its paid-up capital.

A hope for survival, however, kept the International Leasing stock afloat at Tk7.1 per share during the closing of Wednesday's trading on the Dhaka Stock Exchange.

Incorporated in 1996, International Leasing went public in 2007.