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Wednesday, September 29, 2010

Sri Lanka The Finance to raise cash, convert deposits to shares

Sept 29, 2010 (LBO) - The Finance Company, a Sri Lankan finance company recovering after a run, is to raise 1.6 billion rupees in fresh capital by attracting new investors and convert deposits into shares, a statement said.

The Central Bank said its Monetary Board has decided that it is now time to recapitalize the company in order to "facilitate the smooth operations of the company in the future."

The new scheme is to be implemented by December 15, 2010.

It has asked The Finance Company (TFC) to invite new investors to infuse fresh capital in the form of 40 million ordinary shares at 40 rupees each.

TFC also has to "attract strategic investors capable of infusing funds and playing an effective leadership role in managing the firm."

The central bank said TFC will also provide an opportunity for about 10 percent of its existing deposits to be converted into 100 million non-voting shares of 20 rupees each, converting about two billion rupees in deposits 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 statement said.

The regulator intervened to stabilize The Finance Company (TFC) after it suffered a run with the collapse of several firms in its parent Ceylinco Group.

Merchant Bank of Sri Lanka, the investment banking unit of state-owned Bank of Ceylon, was later appointed as the managing agent of TFC in mid-2009.

"As a result of such interventions, the company has now recovered from the initial shock, while public confidence has been restored," the central bank said.

"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 Finance Company is recovering and had reduced losses to 431 million rupees in the June 2010 quarter compared with a loss of 693 million rupees the year before.

source - www.lbo.lk