Bank Asia sues Western Marine Shipyard to recover Tk505cr

Infographic: TBS

Bank Asia has filed a case against Western Marine Shipyard Limited to recover a classified loan amounting to Tk505.90 crore.

Artha Rin Adalat has already summoned 11 directors of the Chattogram-based shipbuilding company, including the managing director, to appear in court on 6 February next year.

Seeking anonymity, a senior official at the private sector lender said that the company has not been paying the loan instalments for a long time despite regular reminders.

So, to recover the loan, a case was filed against the company with the Money Loan Court in Chattogram on 26 October.
Captain Tareque M Nasrullah, executive director of Western Marine, told The Business Standard, "I know nothing about loans and cases."

Later, this correspondent called the land line of the company for the comments of its managing director, but no one answered.

Earlier, Dubai-based Al Rashid Shipping Limited filed a lawsuit against Western Marine in June 2020, four months after it was scheduled to deliver two oil tankers.

According to Western Marine's financial report for fiscal 2019-20, it has a total debt of Tk1,338 crore with 10 banks and seven non-bank financial institutions.

The update information could not be known as the company has not published its financial reports for the 2020-21 and 2021-22 financial years.

The Bank Asia official said Western Marine Shipyard had assets of Tk552 crore while its debts had climbed up to around Tk2,000 crore.

According to data available on the Dhaka Stock Exchange (DSE) website, the company was profitable until fiscal 2019-20 when it paid a dividend for the last time.

The company had decided to pay a 1% cash dividend the following year but did not.

According to sources in the company, it has not been in production for the last two years due to a lack of working capital. The company has not been able to resume production owing to a lack of necessary financing from banks.

In 2020, the company applied to the securities regulator to raise funds by issuing right shares in the stock market. With this money, Western Marine wanted to pay off debts and expand the factory. But the Bangladesh Securities and Exchange Commission (BSEC) rejected the application.

Western Marine, which started the journey in 2000, gained prominence by building 150 ships in 20 years and earning remittance through exports, has now almost lost its business and plunged into a cash crisis.

The company has hardly received any domestic or foreign orders after failing to keep promises on a few international deliveries.

The sorry state of today has little resemblance to its past record of exporting 33 ships to 12 nations, including Germany, Finland, Denmark, and the United Arab Emirates.

The company had raised Tk157.50 crore from the stock market in 2014, following investors' high hopes for the shipbuilding industry.

For this, the company sold each share for a total of Tk35 with a premium of Tk25.

Currently, the share price of the company on the Dhaka bourse is Tk11 only.

Captain Md Anam Chowdhury, president of the Bangladesh Merchant Marine Officers' Association and Western Marine's independent director, had earlier told TBS, shipbuilding is a tech industry which can thrive on long-term and low interest loans. Without government support, this industry cannot survive.

Anam suggested launching a monitoring system to ensure proper utilisation of loans.

It takes a long time to make profits and retain a positive business growth after investing in shipbuilding, traders in this industry said.

But shipbuilders took short-term loans at high interest rates from banks and invested in long-term projects. Sometimes it takes around two years to build a ship, which should be completed in six months due to unskilled workers and other obstacles, industry insiders said.

Therefore, company owners have to count losses for selling a vessel at a low price or pay a penalty for failing to meet the deadline for delivery, they added.

Not only Western Marine, but other shipbuilders have also been facing similar challenges without a source of financing.