Construction of the maiden Dhaka elevated expressway may get into a quandary as the Chinese lenders have suspended funding following one guarantor's failure to comply with terms and conditions.
Citicorp International Limited, the Regional Loans Agency of the Chinese lenders, already informed the borrowers last month about the update on fund freeze.
In an email, Citicorp on January 24 this year said to the borrower and the guarantors, "As of now, there is no further update about the fund disbursement, and given the non-receipt of the funds from lenders, agent cannot remit funds to the borrower for today's drawdown. Hence, the drawdown will be cancelled until further update."
Barrister Imtiaz Farooq, a counsel for the Italian-Thai Development Public Company Limited (ITD), the main contractor of the project, told the FE correspondent that suspension of fund disbursement by the Chinese lenders of the project still remains and the contractor is searching alternative sources of funding.
Italian-Thai Development Public Company Limited, also one of the guarantors of the loan, violated the terms and condition, according to the lenders.
In the project ITD has 51-percent share and two Chinese companies-China Shandong International Economic and Technical Cooperation Group (CSI) and Sinohydro Corporation-have 34 and 15-percent shares respectively.
Documents submitted in the Bangladeshi High Court suggests that CSI and Sinohydro Corporation Limited have completed their payment within stipulated time while ITD constantly failed to comply with lenders' requirement of payment. The total outstanding from the ITD was USD 10.11 million till January 2024.
As per the agreement on the loan, if any of the guarantors fails to pay the due interest in due time, other two guarantors will pay it and in exchange the defaulted guarantor company will adjust its share with the other two companies within five working days. However, the ITD has failed to comply with the condition.
The lenders, Export Import Bank of China (CEXIM) and Industrial and Commercial Bank of China (ICBC), agreed to lend a total of US$ 861 million for the First Dhaka Elevated Expressway (FDEE) project.
They have already disbursed USD 427.76 million by 12 installments. But new disbursement of the loan has already been stopped by the lenders.
Additional Attorney-General Barrister Mohammad Mehedi Hasan Chowdhury, also a counsel for one of the guarantor companies, China Shandong International Economic and Technical Cooperation Group (CSI), told the FE that the project "may halt anytime for shortage of funds as the dispute centering share transfer among the shareholders has not been solved".
Lawyer Imtiaz Farooq said, "The Chinese shareholders colluded with the Chinese lenders and tactfully stopped the disbursement of the loan to acquire the stake of the ITD."
Meanwhile, without adjusting shares, ITD initiated an arbitration case in front of Singapore International Arbitration Centre (SIAC) against the lenders, sponsors and guarantors. It also applied for an order of status quo from the High Court of Bangladesh.
Upon hearing the cases, a High Court bench of the Bangladesh Supreme Court on January 29 this year issued a status quo upon the demand for share transferring among the guarantors of the project, which was later upheld by the apex court.
Attorney-General AM Amin Uddin in his personal capacity and Barrister Imtiaz Farooq appeared in the apex court hearings on behalf of the ITD, while Additional Attorney-General Barrister Mohammad Mehedi Hasan Chowdhury, also in his personal capacity, represented the Chinese company CSI.
Mr Imiaz Farooq says, "We have filed an arbitration case before the SIAC to resolve the problem. If the Chinese lenders finally stop funding in the project, the ITD will collect fund from alternative source. ITD as the main sponsor organization is determined to complete the megaproject."
Project Director of the FDEE AHMS Aktar says suspension of funding by the Chinese lenders would not stop the construction work of the project.
However, he feels the dispute that has arisen between the lenders and the borrowers is quite normal in disbursing funds. He expects the dispute will be solved soon.
© 2024 - All Rights with The Financial Express
