The Standard Credit Lanka Ltd, formerly known as Ceylinco Investments and Realty Ltd, has merged with Entrust Ltd, holding company of The Multi Finance Company Ltd, under the intervention of the Central Bank which has developed a formula to restructure struggling finance and leasing companies.
The company signed an MoU with Entrust for this merger at the Central Bank on Tuesday, according to a senior official of the Central Bank. This will enable the two companies to work towards the formulation and implementation of the restructuring plan which is approved by the Monetary Board of the Central Bank, he revealed.
As an initial step, Entrust Ltd will be engaged in building confidence in the minds of depositors with regard to the conversion of their deposits into shares. It is also planned to use the systems, procedures and manpower of Entrust Ltd in the areas of debt collection in order to enhance the monthly collection of rentals, which will improve Standard Credit Lanka’s cash flow to service the existing deposits, he added. Balance sheet restructuring of these companies is now underway.
Standard Credit has been able to manage its business affairs with the guidance of Central Bank appointed Managing Agent, The Merchant Bank of Sri Lanka since the beginning of the Golden Key crisis. Over the last two years the company has managed its business affairs by making part refunds of the deposits, payments of monthly interest at reduced amounts and also its overheads, without soliciting any new deposits or bank borrowings, but merely improving the collection of rentals.
However, this situation is expected to improve further with the implementation of the proposed business plan, officials of the company said. The merger with Multi Finance Company will add strength in building public confidence, improving the overall management of affairs of the company and will also facilitate the listing in the Dirisavi board of the Colombo Stock Exchange, they said. The depositors of Standard Credit Lanka who are holding non-voting shares will be able to dispose their shares and recover part of their original deposit. It is also envisaged that the re-payment of balance deposits would be done, earlier than anticipated, they added.
According to Central Bank sources, when the Ceylinco Group took the hit in the wake of the 2008 global recession, Ceylinco Sriram also was badly affected. Ceylinco Sriram Group companies- Sriram Securities (Pvt) Ltd, Sriram Asset Management (Pvt) Ltd and Sriram Capital Management Services (Pvt) Ltd (along with the latter’s subsidiaries Ceylinco Leasing and CLC Asset Management Company- which had accepted public deposits) collapsed and most depositors are still fully unpaid to this day. However two such Sriram subsidiaries have been renamed and are now functioning as Entrust Ltd (EL), Entrust Securities Ltd (ESL) along with The Multi Finance Company Ltd (TMFCL).
MFL is one of the smallest registered finance companies in Sri Lanka, accounting for 0.21 % of the industry’s assets. MFL’s major shareholder, Ceylinco Shriram Securities Holding, had been renamed Entrust Ltd after the Ceylinco crisis.