Deal for two troubled finance companies inches closer

Thursday, 5 April 2018 00:00 - - {{hitsCtrl.values.hits}}

Central Bank Governor Dr. Indrajit Coomaraswamy yesterday confirmed that the monetary authority was working to finalise an investor for troubled EAP Group’s two subsidiary finance companies, but warned the potential cash inflow would not resuscitate them completely.

“The owners negotiated a deal with an investor, and when the deal was presented to the Monetary Board, initially the Board felt that the valuation did not fully reflect the asset base of the group, and then the owners negotiated a higher valuation. The Monetary Board has now given approval to the valuation, and what has to happen in terms of the law and credentials of the investor has been processed,” he told reporters.

“The money will be coming in tranches. It is too early for me as regulator to give more details, other than to say there is a transaction that is well advanced, and hopefully it can be finalised. Now we need to make sure other conditions are met before the transaction is finalised,” he added.

Only once the transaction is finalised will repayments for the depositors of the two finance companies be finalised, the Governor said. It was earlier reported that a Singapore-based investment holding company had agreed to purchase key EAP Group assets for $75 million.

“The money coming in will not solve the whole problem,” Dr. Coomaraswamy warned. “It will be tremendously helpful in stabilising the situation but we would need to find other ways of mobilising further capital to make ETI viable.”

The new investor will manage Swarnamahal Finance and ETI would remain a separate company. Dr. Coomaraswamy was reticent about taking legal action against officials accused of mismanaging the finance companies.

“We will have to get the deal done and then understand what caused the problem,” he said.

The Central Bank in January placed troubled ETI Finance and Swarnamahal Financial Services PLC of ETI Group under a three-member expert panel to bring the two illiquid, mismanaged, non-banking financial institutions into liquidity within six months, mainly through the sale of assets within ETI Group.

The panel consists of former Central Bank Assistant Governor Sepala Ratnayake, former Bank of Ceylon Senior Deputy General Manager P. A. Lionel and former Bank of Ceylon Assistant General Manager H. M. Thilakarathne.

According to the Central Bank, ETI Finance, which has an asset base of Rs. 33 billion, has 33,000 depositors with Rs. 33.5 billion in deposits, while Swarnamahal Financial Services PLC, with an asset base of Rs. 2.5 billion, has 2,300 depositors, with Rs. 2.4 billion in deposits.