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| Wednesday, 3 December 2003 |
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Natwealth in largest ever debt restructuring Natwealth the newly formed investment bank has concluded their largest debt restructuring deal in Sri Lanka. The three step proposal put forward by Bank Natwealth has been jointly accepted by six banks namely Bank of Ceylon, Peoples Bank, Commercial Bank, Hongkong and Shanghai Banking Corporation, Hatton National Bank, Seylan Bank and has also been approved by the Cabinet economic sub- committee. The structure involves an asset securitisation process whereby CWE's assets to the value of Rs. 1.8 billion have been transferred to a special purpose vehicle (PERC). The CWE has issued a two year deep discount bond with a face value of Rs. 2.1 billion which has been discounted by the government treasury. The second step of the transaction consists of the government issuing a 13 year deep discount bond with a face value of Rs. 4,397 billion which will be purchased by the CWE utilising the sales proceeds of the two year bond. In step three of the transaction the CWE has swaped this 13 year deep discount bond against the outstanding liabilities of the banks. The CWE has also issued semi-annual interest coupons to the banks with a 50 percent interest guarantee by the government. The advantages of this structure is immense whereby it allows the CWE to reduce its borrowing cost by Rs. 200 million per annum whilst cleaning up its balance sheet. It also enables the banks to convert a book loan into a government bond which in turn will help them to reduce the capital adequacy ratios whilst improving their non-performing asset portfolio. The Treasury too benefits since their initial cash outflow is zero. This novel structure can be used as a model for future financial restructuring of government institutions, which in turn will help them to fetch a better price when going in for privatisation. As a result of a cleaner balance sheet, said Mangala Boyagoda, a veteran banker and Natwealth's Managing Director. The Board of Directors of Natwealth are Ranel Wijesinha, Chairman, Dr. Wickrema Weerasooria, A. Khathiruvelupillai and Dhamsiri Fonseka. |
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