The Monetary Board of the Central Bank has directed The Finance Company to recapitalise itself through Rs. 1.6 billion share issue and gave the company a December 15 deadline.
"The Monetary Board has decided that the time was now appropriate to recapitalize The Finance Company in order to facilitate the smooth operations of the company in the future. It has also been decided that the company must be managed by a capable Board of Directors representing the shareholders so that the Managing Agent could exit from the operations of TFC as soon as normalcy has been restored," the Central Bank said in a statement issued yesterday.
The following directives were issued to the once troubled finance company.
(a) Invite new investors to infuse fresh capital in the form of 40 million ordinary shares at Rs. 40 each, and in particular, attract strategic investors capable of infusing funds and playing an effective leadership role in managing TFC.
(b) Provide an opportunity for approximately 10% of the existing deposits in TFC, to be converted into 100 million non-voting shares of Rs.20 each, thereby converting deposits in the sum of Rs. 2 billion into equity. While this would enable the depositors to have an equity stake in TFC, which is already a listed company, it will also enable TFC to reduce its current liabilities and improve its balance sheet.
"The Board of Directors of TFC and the Managing Agent have accordingly been directed to implement the above scheme by 15 December 2010. In accordance with such directions, TFC would be expected to make the formal invitation to investors in due course," the Central Bank said.
"The Central bank would oversee the implementation of the above measures as well as ensure an equitable allocation of shares among investors in the interest of long term stability of the company and the financial system," it said.
source - www.island.lk
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