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Thursday, 30 September 2010 22:29 - - {{hitsCtrl.values.hits}}
Monetary Board calls for recapitalisation to facilitate smooth operations
IN February 2009, the Central Bank of Sri Lanka (CBSL) intervened to stabilise The Finance Company PLC (TFC) in the face of difficulties encountered by the TFC as a result of the collapse of the several Ceylinco Group establishments.
The interventions included the appointment of a Managing Agent and the issue of several specific directions to TFC. These measures contributed to stabilise TFC and to safeguard the interests of the company and its stakeholders, including the employees, customers, depositors and shareholders, and also to maintain financial system stability in the country.
As a result of such interventions, the company has now recovered from the initial shock, while public confidence has been restored.
In that background, the Monetary Board of the CBSL has decided that the time is now appropriate to recapitalise the 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.
Towards such objective, the Monetary Board has directed TFC to:
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.
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 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 will be expected to make the formal invitation to investors in due course.
The CBSL will 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.