CIFL to meet all depositors on 10 Sept to seek approval for revival plan

Friday, 6 September 2013 03:42 -     - {{hitsCtrl.values.hits}}

The troubled finance company CIFL is to meet all depositors on 10 September to explain the restructuring plan already approved by the Central Bank and get their consent for its implementation. The move is following a meeting yesterday between the Central Bank, depositor representatives and Peoples Leasing and Finance PLC, the managing agents of CIFL at present. Among other objectives of the restructuring plan is to get a new investor to the company. As at June 2013, CIFL’s deposit liabilities amounted to Rs. 3.2 billion, up from Rs. 2.7 billion a year earlier. Total liabilities were Rs. 3.6 billion, up from Rs. 3 billion. Assets were worth Rs. 3.8 billion, up from Rs. 3.7 billion a year earlier. The company’s retained loses were Rs. 460 million as at June 2013 and shareholders’ funds amounted to Rs. 189 million, as opposed to Rs. 705 million a year earlier. The Daily FT reported on Tuesday that the Colombo Fort Magistrate issued notice returnable on 16 September on three Directors of CIFL for allegedly cheating and committing a criminal breach of trust with regards to depositors’ money. Filing a further investigative report regarding the incident, the Slave Island Police submitted to Court that the Police have currently received over 70 complaints against CIFL. A day later Colombo Fraud Investigations Bureau (CFIB) filed six fresh cases in Court against CIFL alleging that the finance company is alleged to have cheated Rs. 9.8 million belonging to six depositors. In response to media reports including in the Daily FT, the CIFL in a filing to the CSE yesterday, CIFL’s Non Executive Director Lakshman Rupasinghe said former Chief Executive Officer (CEO) Jayanth Wickramarathne was removed from his position as per Monetary Board direction (dated 24 December 2012), and Non-Executive Director (former chairman) Lakshman Rupasinghe was asked to take over the position of acting CEO. Subsequently, a new CEO Gamini Karunathilake was appointed on 15 January 2013. CIFL said in its statement: “Due to the change of management, majority of depositors started demanding their deposits and the inflow of cash was not sufficient to meet the cash requirement. Simultaneously the new investors to the holding company Aspic group by their letter dated 12 February 2013, instructed us to maintain the “status quo” of the company and to refrain from any sale of assets or raising any capital until their arrival on the Board of Directors. “This information caused the bankers to squeeze their facilities to our company which resulted in few of our cheques getting dishonoured. Finally on 2 May 2013, the new investors took over the management of the company with the promise of settling all these liabilities and interests due on deposits but failed to introduce any funds despite promises given to the company and to the Central Bank. After running the company for almost two months, the Central Bank assigned the management to People’s Leasing and Finance PLC from 1 July 2013. “Two depositors who had their cheques returned have complained to Slave Island Police who subsequently filed action against the two signatories and were released on surety bonds in a previous hearing. When the case was taken up on 2 September 2013, our lawyers informed the Courts about the current situation and the inability of the directors to make these payments due to the restructuring program undertaken under the supervision of the Department of Non Bank Financial Institution Supervision of the Central Bank. Accordingly the Courts summoned the remaining Directors and also the Director Non Bank Supervision Department of the Central Bank to obtain information about the restructuring plan approved.”