Move to stabilise Finance and Leasing Companies of the Ceylinco Group

The Central Bank of Sri Lanka (CBSL) is currently implementing the stimulus package for the banking, financing and leasing industry, which was approved by the Cabinet of Ministers on February 25.

In this connection, the following steps have already been taken in the implementation of the stimulus package and interventions to stabilise Registered Finance Companies (RFCs) and Specialised Leasing Companies (SLCs).

* The operating instructions for facilitating the sale of land and the issue of Government Guarantees for facilities obtained from licensed banks and approved lending institutions, have been finalized and will be issued to the RFCs and SLCs this week.

* An Expert Group has been appointed as per the Cabinet decision, and such group will initially consist of the following persons:

Central Bank
 
Chartered Accountant, President, Institute of Chartered Accountants of Sri Lanka Nishan Fernando, Attorney-at-Law, Precedent Partner, Nithya Partners and former Director General of the Securities and Exchange Commission Arittha Wikramanayake, Chartered Accountant, President of the Association of Accounting Technicians of Sri Lanka and Additional General Manager, National Savings Bank H M Hennayake Bandara, Former President, Primary Dealers’ Association and Deputy Chairman, Browns Group of Companies Ajith Devasurendra.

The Expert Group will advise and assist in the implementation of the eight point stimulus package, as well as to stabilise the situation in any RFC and SLC. The Expert Group has also intimated that they will not accept any remuneration for their services.

The CBSL has also taken the following special measures of intervention in relation to five RFCs in the Ceylinco Group:

The Finance Company PLC (TFC)

Lankaputhra Development Bank Ltd. has been appointed as the Managing Agent of TFC, which will function under the guidance of the Expert Group and the CBSL.

* The CBSL has appointed certain key executives who would be entrusted with the overall management responsibilities of this company; all other directors have been removed from their executive positions on the Board of Directors.

* The Expert Group has commenced its operations and is in the process of making the necessary interventions expeditiously.

* The company has taken many steps to reduce administrative and operating expenses substantially and the CBSL has ordered that the company does not transfer any resources of the company to related parties.

* The trade unions in the company have given an assurance that the employees will work towards reducing expenses in order to further stabilise the company

The Finance and Guarantee Company Ltd

The Merchant Bank of Sri Lanka PLC has entered into a management agreement with The Finance and Guarantee Company Ltd., so that the activities of The Finance and Guarantee Company Ltd. would be managed and monitored by the Merchant Bank of Sri Lanka PLC.

Ceylinco Investment and Realty Ltd

Lankaputhra Development Bank Ltd. has been appointed as the Managing Agent of Ceylinco Investment and Realty Ltd., which will function under the guidance of the Expert Group and the CBSL.

Asian Finance Ltd

Lankaputhra Development Bank Ltd. has been appointed as the Managing Agent of Asian Finance Ltd., which will function under the guidance of the Expert Group and the CBSL.

Seylan Merchant Leasing PLC

Seylan Merchant Bank PLC has decided to divest its shareholding of about 81% in Seylan Merchant Leasing PLC to People’s Leasing Company Ltd.

In these companies, the Expert Group would advise the management teams of additional steps to be taken, while also assisting in obtaining financing support from financial institutions.

The measures and their quick implementation are expected to stabilise the above mentioned companies of the Ceylinco Group, as well as give confidence to the entire industry.

With regard to repossessed vehicles and equipment, in accordance with the Cabinet decision, all movable assets repossessed by RFCs and SLCs and yet undisposed of and in their possession, will be offered to the original users (lessees/hirers) before April 30, 2009, on the following terms:

(a) the original lessee or hirer must agree to re-enter into a new lease within one month of the offer, (b) Penal interest or similar charges to be waived by the RFC or SLC, (c) Seizing charges, storage/parking yard charges, to be waived by the RFC or SLC, (d) 25% of the outstanding amount of the existing facility to be paid by the original users (lessees/hirers) at the time of re-hire of the asset, and the balance amount to be on a new two-year finance lease, with normal terms and conditions as may be set out by the RFC or SLC.

This measure would enable these assets to be put into productive use again, thus supporting economic activity in the country.