Government decides to convert Shipping Corp’s debt into equity

The government has taken the initiative to convert the Tk 1,500 crore liabilities of the Bangladesh Shipping Corporation (BSC) into shares.

The publicly traded state-owned company that owns and operates the ocean-flagged vessels took responsibility when it bought six new Chinese vessels under a government-to-government (G2G) deal a few years ago. .

The Ministry of Finance has already sought and obtained the opinion of the securities regulator regarding the conversion of debt into equity, according to documents exchanged between the ministry, the company and the Bangladesh Securities and Exchange Commission (BSEC).

“The company can issue new shares against the principal amount that the government has lent to the company,” the BSEC said recently in response to the finance ministry’s letter.

“The government can offload the new BSC shares through the stock exchange trading platform,” the securities regulator added.

BSEC rejected the main idea of ​​converting interest payable on loans into equity, according to documents exchanged between the company, the government and the regulator.

Seeking anonymity, a finance ministry official told The Business Standard on Saturday: “This is in an early planning phase and there is no concrete update to share.”

BSEC Commissioner Dr Shaikh Shamsuddin Ahmed told The Business Standard: “We encourage the government to use the capital market much more to fund ongoing economic development.

SOEs (public companies) in good financial health should convert their debts to the government into shares and the government could provide the market with a supply of new shares by offloading some of them, he said.

“Shipping Corporation represents Bangladesh on the oceans and they need a lot more ships to strengthen the country’s maritime sector,” the BSEC commissioner said, adding that he had already had a meeting with the relevant officials.

Asked about the details regarding the conversion of BSC shares, he echoed the same view as the ministry official.

“Everything is still in principle. Whatever happens will be for the greater good of investors, the market and the issuer,” he said.

BSEC executive director and spokesperson Rezaul Karim said, “We have not yet received a request from the issuer in this regard.”

Prof Shamsuddin Ahmed said the securities market regulator has also encouraged the BSC to plan a large blue bond which would help it meet its financial needs to expand its fleet.

The government has funded six new ships

In 2014, BSC signed a contract to acquire three new tankers and three new bulk carriers through China National Machinery Imp & Exp Corp (CMC) under a G2G agreement.

As part of this agreement, China Exim Bank provided a concessional loan of $184.5 million to the Government of Bangladesh.

The amount equivalent to more than Tk 1,500 crore is treated as loans to BSC by the Government of Bangladesh and the company is obligated to repay the debt in 20 years with a grace period of five years.

The BSC received all vessels with a capacity of 39,000 DWT each before the pandemic and they are now in commercial operation, according to the BSC’s annual report for 2020-21.

The long-neglected company now has eight ocean-going vessels, including all six new ones, and with government support, it plans to expand its fleet by adding new tankers, mother product tankers, mother bulk carriers, supply vessels. lightening, supply ships and LNG carriers.

The government has recently converted its interest-bearing loans to some of the public enterprises into shares or other forms of securities such as preferred shares.

Following the share conversion, the Power Grid Company of Bangladesh is set to convert a large portion of its public debt into sunk preferred shares.

Bangladesh Submarine Cable Company Ltd, the state-owned internet gateway company, is set to convert part of its government loans into its common stock at the rate of the six-month average market price of its shares.

Profits jump and stock prices soar

The company saw a strong increase in profits in fiscal year 2020-21 which also continued in the first two quarters of fiscal year 2021-22.

Despite an annual decline in operating income, lower various costs including those related to operations, administration and the provisioning of deferred taxes, the company posted a 74% growth in net profits for the 2020-21 financial year.

After an annual earnings per share (EPS) of 4.72 Tk, the company posted an EPS of 8.28 Tk for the period July-December of the financial year 2021-22, against 1.66 Tk for the corresponding period of the previous year.

In the second quarterly statement, the company attributed the rise in profits to higher global shipping rates.

The disruption of the pandemic has resulted in a four to five-fold increase in shipping rates over the past two years.

Shares of BSC on the Dhaka Stock Exchange closed at 141.1 Tk on Thursday. After the jump in earnings, the stock recorded a gain of around 200% in December-January.
Source: The Trading Standard

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