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By Shirajiv Sirimane

A Maldivian entrepreneur will invest Rs. 150 million to construct a 104-room hotel for Vanik Incorporation Limited.

The hotel - Marigold is already under construction in Nuwara Eliya and the total investment needed will be paid in three instalments.

President and CEO Vanik Incorporation Limited, Jastin Meegoda said that initially they need Rs. 60 million to settle a loan and the balance will be needed to complete the hotel.

"Our stakes in the hotel will come down but we will increase the share to accommodate the investor." He said that the general impression in the local market was that Vanik was not stable and it would fall at any time.

"Everybody thought that Vanik was beyond recovery and we have been basically running down our operations by selling our assets to pay off some of our liabilities and our activities were not profitable. But over the last three years we have proved that this is wrong."

He said that the crisis of Vanik was predominantly due to the run on the investments public have made with Vanik and the company had to manage the crisis on its own as no external assistance was forthcoming.

"Over the last three years we have taken several steps which has paid rich dividends to the company."

Meegoda said that profit making independent subsidiary companies within Vanik were isolated from the adverse impact of the crisis of the main company and senior officers were made Managing Directors of these companies with authority to run day to day operations."

He said that another step that was taken in the last three years was to create a team of officers to concentrate fully on the speedy recovery of their loan/lease portfolio.

"We also reduced our overheads significantly by cutting down staff under a voluntary retrenchment scheme, moving on to a cheaper premises and by cutting down perks enjoyed by the staff."

He said that from the year 2000 and up to 2002 the company had been able to generate Rs. 4.3 billion funds mainly from the recovery of loans/lease portfolio (Rs. 2.3 billion.) sale of assets (Rs. 1.8 billion.) other income (Rs. 153 million.) and refining of its own loans including staff loans (76 million.) "These funds were paid to repay capital(Rs.3 billion.) payment of interest (Rs. 884 million.) investment of newly created companies (Rs. 96 million.) overheads including staff compensation under the retrenchment scheme. (Rs. 364 million.) He said that this has been achieved without taking any loans from banks in the last three years or any other financial assistance.

Meegoda said that the company is aiming to recover a further Rs. 400 million this year and they would pay Rs. 100 million to the banks this year.

"All our remaining loans will be settled within ten years."

"The Capital due to Cooperative Banks will be repaid in 10 annual instalments from 2004 along with interest at one-year TB rate plus 1%. Interest accrued for the year 2002 will also be paid.

The quantum and the mode of payment of the accrued interest prior to year 2002 will be negotiated."

He said that all other liabilities will be paid over a period of three years.

Vanik is also planning to sell part of the equity holdings in Vanik Leasing Limited (VLL) and Vanik Factors Limited (VFL) in the market in the years 2005 and 2006 respectively but will retain the controlling interest.

"Forbes Debenture (15%) of Rs.298 million will be converted to Redeemable Cumulative Preference Shares with a coupon of 15%. Action is being taken to obtain necessary approvals."

"Capital Guaranteed Debenture (Rs. 400 million) to be revolved for a further period of four years.

It is requested that the consortium of banks will guarantee 50% of the amount which part present guarantee by the People's Bank; the other 50% to be guaranteed by USAID.

This needs to be done only at the end of 2003.

The banks will have one full year to monitor the progress of the new proposal," he said.

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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