Biman seeks BB nod on $118m swap loan

The Biman Bangladesh Airlines Limited sought the central bank's nod on a 'swap' arrangement for the US $ 118 million Pre-Delivery Payment (PDP) loan for two new Boeing aircraft, officials said.

Biman managing director and chief executive officer (CEO) Kevin J Steele in a recent letter to Bangladesh Bank (BB) governor Dr Atiur Rahman said the state-owned airliner needed to make the payment while taking delivery of the two aircraft.

The two aircraft would be delivered on February o5 and in the third week of March, sources said.

"We have requested the BB to give approval for the swap arrangement," a high official of the Biman told the FE.

The state-owned entity also sent letters Wednesday to the ministry of finance (MoF), the ministry of civil aviation, the civil aviation chairman and the Biman board of directors in this connection.

"We have been in contact with the Sonal Bank (UK) about the 'swap' arrangement for the US $ 118 million Pre-Delivery Payment (PDP) loan for our 2 B777-300ER aircraft from the Boeing," said the Biman letter signed by Kevin J Steele.

"The US$ 118 million PDP loan is due to be repaid, when the B-777-300ERs are delivered on February 05 and in the 3rd week of March," the letter said.

"Sonali Bank (UK) would like to discuss this with their board after a formal approach from the Biman. So, we would like to seek your approval to proceed on this before we formally approach them," said the Biman MD in the letter to the BB.

The letter also said that the issue of the loan was discussed verbally in the standing committee meeting on non-concessional loans.

The Biman earlier in 2008 signed an agreement for procurement of four 777-3000 ERs, four 787-8s and two 737-800s at a cost of Tk 172.50 billion ($2.5 billion) to modernise its fleet.

Under the purchase deal, the Boeing already delivered two new Boeing 777-300ER aircraft in October and November 2011.

Biman sources said the national flag carrier owed over Tk 5.0 billion to 36 local and foreign organisations on account of its purchase and maintenance costs.

Biman that came into existence on January 4, 1972, now has two Boeing 737, four DC 10-30, three Airbus 310-300 and two F28 regional jet aircraft. It operates flights to only 19 cities across two continents.

Swap loans make foreign currencies readily available for central banks. By definition, the purpose of the swap system is to reduce the cost of loans between central banks, so that dollars or euros are cheaper to obtain.

The arrangement meant for the Saarc countries is a measure that addresses the short-term liquidity and balance of payment (BOP) difficulty.