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Thursday, February 10, 2011

Strategic investors commit Rs.500mn in Nation Lanka Finance private placement deal

The strategic investors of the Rs.500 million private placement of Nation Lanka PLC have already furnished bank guarantees and/or guarantees from finance companies to go ahead with deal, according to a recent circular sent to its shareholders by the finance company, which was formerly known as Ceylinco Securities.

As per the circular, the strategic investors are Asanga Seneviratne led Investor Access Equities Limited, (70 million shares worth Rs. 350 million), high net worth investor Jayaprakash Rudra (16 million shares worth Rs. 80 million) and Nawaloka Construction Company Limited (14 million shares worth Rs. 70 million), a subsidiary company of Nawaloka Holdings.

Nation Lanka Finance also plans to raise another Rs.300 million by way of rights. The Rights Issue will be on the basis of three new shares for every two held at Rs. 5 each, the same price determined for the private placement of shares. This will involve issuance of 59.958 million shares raising Rs. 299.79 million. The rights will be issued to registered shareholders of the company on the March 9, 2011.

Once the shares from rights and private placement are taken together they will constitute a 50.02 percent of the total issued and paid up capital of the company, the shareholder circular noted.

Since the shares to be issued under the private placement is likely to exceed 20 percent the deal is also subject to approval from the Securities and Exchange Commission for the waiver of the provisions of the listing rules that have placed certain restrictions.

According to the circular, the money raised via rights and by way of private placement will be utilized for disbursement of credit facilities. It also said that with infusion of such capital it would facilitate the company to comply with the Finance Leasing Gearing Ratio Direction (FLGRD) issued by the Central Bank for finance companies.

It is expected with the proposed infusion of capital through rights and private placement the company's credit portfolio will grow approximately Rs.790 million.

The current stated capital of the company is Rs.518 million represented by approximately 40 million shares. With the rights issue of 59 million shares and the private placement of 100 million shares the total number of shares would increase to 199 million shares and the stated capital will increase to Rs.1.3 billion.

As at December 31, 2010 the public holding of the company is 80.46 percent. Subsequent to the proposed private placement and rights issue the public holding is expected to dilute to 44.79 percent.

Following the crisis that hit the Ceylinco group in the early part of 2009, the company had to redeem a substantial amount of debt instruments resulting in a severe strain on its liquidity. Even though the company raised Rs.240 million by offering rights, of the liquidity crisis prevailed and it reported a Serious Loss of Capital in July 2010.

source - www.dailymirror.lk