Business Times

MBSL’s rescue formula changes from win-win to threat of liquidation

The Finance and Guarantee Company Ltd (F&G) managed by Merchant Bank of Sri Lanka (MBSL) appointed by the Central Bank is to implement an action plan to convert a minimum of 60% of the deposit liability into equity to prevent the collapse of the company. In a letter to F&G customers, Chairman of MBSL M.R. Shah has urged the depositors to convert 70% of their deposits to shares promising them with an unspecified ‘attractive’ rate of interest for their balance 30%.

After being re-launched in June this year, F&G is on the verge of collapse again due to erosion of performing assets and depletion of funds inflows. Mr Shah stated that the company continued to pay monthly interest on the deposits, from the funds derived from the routine collections and recoveries from debtors.

This has seen the erosion of the company’s revenue deriving assets, depositors say. The company is now faced with a negative net worth with the mismatch between assets and liabilities being over Rs. 1 billion. Mr. Shah pointed out in the letter that if certain steps are not taken, the F&G won’t be able to pay the present monthly interest for depositors beyond early next year and the company may have to be liquidated.

Depositors have been given 10 days to give their consent to implement this plan of action aimed at converting deposits and promissory notes in to shares. A large number of depositors including senior citizens are vehemently protesting this plan. Several depositors told the Business Times that they were given an assurance by former Chairman MBSL Janaka Ratnayake in a letter dated 18-02 -2009 that depositors will be paid 9% interest rate and action will be taken to restructure the company.

Meanwhile the District Court action against F&G comes up for hearing tomorrow. In this case, MBSL solicited investment and a deposit of over Rs 2 million had been placed by the plaintiffs, and Certificates of Deposits issued with the added security of promissory notes. F&G had then defaulted maturity payment and reneged on the promissory notes.

Top to the page  |  E-mail  |  views[1]
SocialTwist Tell-a-Friend
 
Other Business Times Articles
Sri Lanka rejects compensation claim in hedging dispute
WTO: Structural reforms needed for growth in Sri Lanka
Jobs: From Israel with love
GK assets including Ceysands Hotel sale suspended
Air Senok soon to fly
SLT Group’s 9-mth pre tax profit tops Rs. 3.73 billion
Not interested?
Comment - Quick-fix tenders, short-cut to development
Feature - Foreign higher education risk rises to highest levels
Feature - ‘Stressed out?’ Learn how to cope
Laugfs IPO opens, says aggressive campaign improved recent revenues
India launches green tribunal
South Asian countries drawn to Sri Lankan trade and investment prospects
Letters
Controversial share offer plan to Golden Key depositors shelved
ComBank Q3 pre tax profits up 54%
Serendib Hotels Plc gets new CEO
SL should target 15% GDP thro’ remittances : Cabraal
On ‘expert’ views on telecom charges
State banks unwilling to give cheap housing loans to ETF members
ComBank cuts interest rates on credit cards
Social Media and Facebook new tools for marketers
Merchant Credit, Ceylease to be merged with MBSL
Sri Lanka’s legal luminaries call for competitive law regime in attracting FDIs
Dr Uditha become Professor
3-day Trade Fair "Trincomalee opens its doors"
Lanka Bell earns coveted ISO 9001 quality certification
More consultation needed in SEC’s proposed public float rules
Piramal Glass show 1st half profit from loss earlier
KVPL posts 9-month net profit of Rs 160 million
Hydro Power Free Lanka Ltd IPO oversubscribed by 57 times
LOLC’s Working Capital Business Unit reports 53% growth
Aitken Spence half-year profits up 37%
JKH earnings up partly due to gains from share sales in subsidiary firms
CSE listing rules may be changed
New questions over Sri Lanka's bid to strike oil
NIC number as new ID for EPF members
2010 Budget created very bad precedent, says senior economist
Memories of the South Asian Econ Undergrads Conference
Book Review: Money, inflation and output
Undersea, western theme events, ‘The Banquet Company’ does it all
MBSL’s rescue formula changes from win-win to threat of liquidation
Shell handover on Nov 15
Sri Lanka one of the safest places for tourists
Harmonisation of IFRS will help Sri Lanka to attract foreign investments
Heraymila investments in SL springboard to South Asia, China
Cargills expands into dairy through Kotmale

 

 
Reproduction of articles permitted when used without any alterations to contents and a link to the source page.
© Copyright 2010 | Wijeya Newspapers Ltd.Colombo. Sri Lanka. All Rights Reserved.| Site best viewed in IE ver 6.0 @ 1024 x 768 resolution