The Central Bank (CB) is yet to take action in the deal between some investors/directors at The Finance Co (TFC) and state-owned National Savings Bank (NSB) with many raising issues pertaining to the lies and deception surrounding this transaction.
|NSB workers protest . Pic by Amila Prabodha
The Business Times reliably learns that the Securities and Exchange Commission (SEC) had sent two letters to the CB pointing out certain irregularities in this deal. "The first letter pointed out that NSB bought it at a premium - Rs 50 per share against the market price of Rs 30-31 per share and requested the CB to investigate," an informed source told the Business Times. The second letter has noted the settlement risk as NSB hadn't paid its settlement bank, Sampath and had implored CB to intervene, he added, saying that up to now CB hasn't taken any action.
"When NSB didn't pay Rs 390 million that was due to Sampath, the CB could have forced NSB to settle this money under CB's Settlement Act," the source told the Business Times. Attempts at contacting CB officials by Business Times on Friday on this issue failed.
On Friday evening, the SEC said the transaction had been reversed. Meanwhile questions are being raised on the lies and deceptive nature of this deal and the credibility of the NSB Chairman, Pradeepa Kariyawasam. The Business Times reliably learns the NSB had written to Taprobane Securities (broker for both the buyer and seller in this transaction) requesting to reverse this transaction about 10 days ago and Taprobane had intimated it to the SEC. On Friday, Taprobane Securities took out a newspaper advertisement saying that both NSB and its selling clients were prepared to reverse the transaction. "... since NSB (our buying client) had expressed the view that it would wish to reverse the recent transaction, we have obtained the consent of our selling clients to reverse the transaction so that they could once again assume the ownership of this parcel of shares. Our selling clients have agreed to do so, because they have intimated to us, that they do recognize the value of the share," it said.
Two of the sellers Dinal Wijemanne and ABC Radio Group chairman Raynor Silva were directors of TFC. Mr. Wijemanne is also CEO of Taprobane Securities which was both the buying and selling broker of the 13 % stake. Referring to several news items on this transaction on April 27, the broker said: "These shares were acquired by our buying client, the NSB. Since then, some debate has arisen regarding this transaction, based mainly on the premise that the price per share at which the transaction was effected was significantly higher than the previous day's trading price. Generally a 13% parcel of shares may attract a 'per share' price that is higher than the 'per share' price of a small quantity of shares that may be traded on the floor."
"We have been informed that the majority of these shares were purchased by our selling clients several months ago at approximately Rs.48 per share, at a time when the share was trading at a considerably lower price."
Analysts say that what NSB (which only made a short public statement regarding the transaction) and its Chairman, widely believed to be one of the architects in this deal say, contradict the Taprobane statement. "Mr. Kariyawasam has told the NSB unions that NSB will not sell the 13% stake as they see immense value in it. This shows that someone is lying," an analyst pointed out.
On Thursday, Mr Kariyawasam, in his second meeting during the week with bank trade unions, told them that the TFC deal was part of a larger plan to take control of the finance company. "He has said that the NSB would then be able to move into other areas like finance leasing, real estate, etc through a subsidiary as a way of getting round the restrictive NSB Act," one trade unionist said, "this is the corporate entrepreneurship model that was explained as the justification for the deal."