2 months ago

Bond conversion into shares

Sea Pearl Beach Resort risks being defaulter if regulator rejects ICB condition

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Sea Pearl Beach Resort & Spa is at the risk of being labelled as defaulter if it fails to covert bonds worth Tk 1.2 billion into shares meeting the conditions put forth by the bondholder, state-run Investment Corporation of Bangladesh (ICB).

The failure would lead to the rescheduling of debt of Tk 1.2 billion while the remaining bonds worth Tk 2.05 billion have already been rescheduled. The Sea Pearl has not been paying installments against the bonds subscribed by the ICB since 2020.

To make the conversion deal happen, Sea Pearl has to get the approval of the Bangladesh Securities and Exchange Commission (BSEC) for releasing shares against the bond amount with a lock-in period agreed by the ICB.

The BSEC earlier said the shares must not be sold within three years after the release, but the ICB says it would not accept shares if the lock-in period is more than two years -- one year for 50 per cent of the shares and two years from the remaining half.

The BSEC had approved a proposal of converting 20 per cent of the bonds worth Tk 3.25 billion, solely subscribed by the ICB in 2017, into shares to reduce the debt burden of the Sea Pearl.

Having been informed of the ICB's conditions, the Sea Pearl on Tuesday communicated the matter to the securities regulator.

"We hope the securities regulator will give its consent considering the interest of both the parties," said Md. Azaharul Mamun, company secretary of the Sea Pearl.

ICB Managing Director Md. Abul Hossain said cost of funds would not be covered if their demands were not met.

"It's the responsibility of the Sea Pearl to ensure the regulatory consent.

"Otherwise, the conversion deal will not be executed," Mr. Hossain said.

Asked about the consequences of bond conversion deal scrapped, the ICB managing director said Tk 1.2 billion would be rescheduled and then the central bank would be informed of the non-payment, if any, of installments.

"Then the Sea Pearl will be labelled as a CIB [Credit Information Bureau] defaulter. This status will hamper the company's business," he said.

The Sea Pearl was declared a defaulter in 2022, and at the end of 2023 the High Court stayed the CIB report following a writ petition filed by the company.

The ICB's managing director said the HC stay order would not remain effective for ever and that the investment bank would again inform the central bank of the non-payment of installments by the Sea Pearl if such a scenario emerged.

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