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By Ravi Ladduwahetty

Vanik Incorporation Ltd has submitted a Business Recovery Plan to the Government to combat the liquidity crisis and has expressed confidence that it will be viewed favourably.

Under the proposal, the company has proposed that a separate business recovery trust be established by the Government to which most of the assets ( investments, real estate and book debts) be transferred and it has been proposed that the Government issue directly or through a medium term transfer paper, of four to five years a Zero Coupon Bond) against the assets transferred.

The main focus of the strategy to restructure the company will be the ability of the subsidiary companies to generate significant profits if they are injected with adequate funds.

The Central Bank has appointed Chartered Accountant Nivaard Cabraal to study the report that Vanik has submitted in the hope that assistance would be forthcoming and the report is with the Government at present, Vanik Chairman Dr. W.M. Tilakaratna told the Daily News.

What we expect from the Government is for it to take over what we owe the Commercial Banks and we will pay back the debt over a period, he said.

We are confident that the Government will view the proposal favourably and the company has continued to aggressively carry out its cost cutting exercises in the wake of the increasing liquidity crisis, he said.

Vanik will also look forward to taking advantage of the new vistas available in the North and the East resulting from the ongoing peace process, Chairman Dr. W.M. Tilakaratna has told his shareholders in his annual report for 2001.

Vanik President and CEO Justin Meegoda has said in his review that the focus was on two action fronts which revolve round (a) aggressively expanding on all the operations of the subsidiaries of Vanik and a recovery plan for the Group's non performing assets. He said that the restructuring process was difficult in the context of the legal framework prevalent in this country where institutions having financial constraints do not have recourse to statutory protection during process of restructuring.

It is also sad that most of the financial institutions have not understood the problems of Vanik. They have not realised that the problems of Vanik have been due to the run on the money market that the public/institutions had in Vanik, the worst crisis that Vanik had to face, he has told shareholders.

He stressed the need for external assistance. " In fact, that is the rationale behind such protection given to Commercial Banks by Central Banks as a lender of last resorts. It is unfortunate that the regulatory authorities have failed to realise that the financial markets have today evolved to encompass a variety of financial institutions which are playing an important role in commercial banks."

Meegoda said that Vanik's continued efforts towards the objective of turning around the company against all obstacles in the market received a new life when the new Government, whose policies were more market-friendly and were tuned to the modern developments in the financial, business and technological world, was formed in December 2001.

The management has submitted an innovative restructuring proposal to the Government in December 2001.

He said that the restructuring process of this bank was in line with most of the business recovery models of other Western and Asian countries.

The income of the Vanik Group for the year ended December 31, 2001 has drastically reduced to Rs.463.6 million from Rs. 1.53 billion for the corresponding period a year ago. The loss before taxation has also increased to Rs.843 million from Rs. 582 million the previous year. The loss after taxation, disposal of subsidiaries and amortisation of goodwill has been reduced to Rs. 1.4 billion from the Rs. 1.8 billion the previous year.

Vanik Incorporation Ltd has 100 per cent equity stakes in the wholly owned subsidiaries comprising:Vanik Insurance Brokers Ltd, Vanik Leasing Ltd, Vanik Factors Ltd, Vanik Securities Ltd, Debt Recovery Services Ltd, Sebrof ( Pvt) Ltd, Forbes Foods Ltd, Forbes Tourism Ltd, Forbes Capital (Pvt) Ltd, Forbes (Ceylon) Ltd, Forbes Investment Services ( Pvt) Ltd Forbes Real Estate ( Pvt) Ltd, Vanik Corporate Services, Vanik Money Brokers Ltd, Vanik Asset Management Services Ltd and Forbes Capital International Ltd of Barbados.

The associate companies are Pan Asia Bank in which Vanik has 20 percent of the equity and Vanik Bangladesh Ltd, Vanik Bangladesh Securities Ltd (both of Bangladesh) and Forbes Travels Ltd in which the parent company has 40 percent of the equity.

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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