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Bids of over Rs. 12 billion needed for restructuring: People's Bank looks for buyer

By Chandani Jayatilleke

The People's Bank will shortly begin negotiations to find investors willing to pump cash into the institution in order to save this premier financial organisation, its Chairman Lal Nanayakkara told the Daily News.

Among the options being considered is the sale of a share to a single Sri Lankan buyer or a consortium. The next option would be to offer shares on the Colombo stock market. "If we fail to achieve any of these solutions, we may find a foreign investor," Nanayakkara said.

He said the Bank's Board of Directors has decided to convert the bank to a Limited Liability Company and conversion will be done through Cabinet approval under Section 2 of the Conversion of Public Corporations and Government Owned Business Undertakings Act of 1987. Such a sale is one of the options the government has explored in its efforts to save the Bank from failure.

The 41-year old state bank has plunged into its current financial crisis as a result of imprudent lending and currently its non performing loans (NPLs) account for Rs. 25.4 billion as at December 31, 2001. Many of these unpaid loans have been made to political favourites.

Therefore, the bank needs bids of over Rs. 12 billion plus sufficient working capital from the investors for restructuring.

The bank will also seek to ensure the rights of it's workers by putting forward a set of rules and regulations at any deal with the buyer. The rules include: secure job opportunities, a guarantee that the organisation would be run as a banking institution, protection for assets and a promise that its properties, which include some prime land and buildings in the city of Colombo would not be sold off.

The government had earlier said that the bank was in a crisis and measures would be taken to save it. The government has been exploring options at the highest level and the Daily News learns that several alternative suggestions are being explored. Employees Unions have protested against the restructuring, arguing that it is possible to maintain it as a government institution.

The Chairman recently called upon its employees to realise the true situation of the bank, requesting their support in this endeavour. He has also had several discussions with Trade Union representatives and explained the situation. "I have also asked them to submit any proposals regarding the restructuring process. But, so far, I haven't received any such proposal."

The Chairman of the Stock Brokers Association Devapriya Ellepola welcomed the plan and advised the bank to sell a 60 per cent stake to a foreign investor and offer 30 per cent on the Colombo bourse. He said the employees should also have a stake. This he said would boost investor confidence and also broad-base ownership.

"We have more customers than any other bank in the country, they rely on us and we rely on them. We must remain confident and retain their confidence and trust. We must all continue to work energetically as a team, attracting customers, collecting debts, finding investors and working towards the targets set in the strategic plan," Nanayakkara said in a recent letter distributed among the bank staff.

"There's no need to panic," he said assuring that only investors who have the ability to take the bank to even greater heights will be considered. The bank will be free from politicisation. But we should have sufficient capital to assert our independence," the chairman said. (Full interview will appear in the Daily News of August 27) 

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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