DSE asked to investigate BD Finance’s MoU with a foreign investor

The Bangladesh Securities and Exchange Commission (BSEC) has asked the Dhaka Stock Exchange (DSE) to investigate the financial impact of the price-sensitive information disclosed by Bangladesh Finance regarding its memorandum of understanding (MoU) with the US investor Sovereign Investment Group (SIG).

Receiving the letter on Sunday, the DSE has already formed a three-member committee to look into the matter and it is working to submit a report to the BSEC in seven days, confirmed DSE Chief Operating Officer (COO) M. Shaifur Rahman Mazumdar.

The bourse already sent a letter to the listed non-bank financial institution (NBFI) on Tuesday asking for a copy of the MoU signed in the Bangladesh Embassy in Washington DC in April, the details of the foreign firm, and the development following the MoU to date.

The BSEC initiated the scrutiny in response to a media report that questioned the authenticity of the price-sensitive information published by BD Finance.

SIG signed its MoU with Bangladesh Finance on 8 April this year intending to invest a tentative $2 billion in Bangladesh in 2 years.

The MoU included three modalities of possible investments — buying BD Finance shares from the secondary market for a seat into BD Finance board, lending BD Finance $40 million mainly to strengthen its sustainability financing portfolio, and arranging much bigger investments from the US and international market for Bangladeshi projects where BD Finance's structured finance team would work as the local partner of SIG.

Being asked about the development, Bangladesh Finance Managing Director (MD) and Chief Executive Officer (CEO) Kyser Hamid told The Business Standard that the two partners are working on all three modalities and right now they are working on the legal framework for the possible cross border transactions.

The foreign investment firm would get the legal framework under formulation vetted or approved by their legal experts to ensure that it would ensure their investors' protection here, he said.   

In Bangladesh, the process of foreign funding to any local lender was taking 2 or more years on average, even if the financing was being done by international investors like the International Finance Corporation, DEG who have offices in Dhaka.

For funding from SIG which is operating from the United States of America things understandably would take some time, he added.

About equity investment in BD Finance, he said, "It was an MoU, not contract. BD Finance will give them a seat in its board if they secure 4% shareholding through accumulating shares from the bourses."

SIG co-founders have a very rich track record in the field of international investments and they would look for investment-worthy projects in the country to arrange financing from the US market, Hamid Said, adding that the tentative $2 billion might be even bigger if local projects can attract investors and the investors are happy with the due diligence reports and the much-needed regulatory ease.

SIG co-founder Larry Knox in his investment banking career of two decades in Wall Street arranged $115 billion in infrastructure financing, Hamid said, adding that Larry's partner Adam Hitchcock, an investor and adviser, served the office of Obama Administration's Chief of Staff and the Council of Economic Advisers.

Hamid is hopeful that within the 10-year tenure of the MoU the partnership with SIG would bring a good result for the economy and his company as well.

"We are preparing ourselves best for the aimed progress," he said, adding that his structured finance team is working on more than a dozen local companies' projects and SIG is already interested in 5-6 of those.

BD Finance shares closed at Tk62.6 in the DSE on Monday.

On top of the fundamental improvements including earnings growth and nonperforming loans control, the introduction of Shariah-compliant financing and change in the management, the MoU with SIG helped BD Finance share price gain 115% in 2021 till date.