Local banks, USAID - new owners of Vanik

Ravi Ladduwahetty

A consortium of local banks, financial institutions and USAID are now the new owners of the debt ridden merchant bank-Vanik Incorporation Ltd following the unanimous approval of the restructuring proposals presented by the bank to shareholders at the Extra Ordinary General meeting at BMICH last week.

The consortium of local banks which now own 57% of the Vanik shares are: the Bank of Ceylon, People’s Bank, Seylan Bank PLC, Pramuka Savings and Development Bank, Sterling Merchant Bank, Union Bank and the Cooperative Rural Banks of Anuradhapura, Central, Colombo, Galle, Gampaha, Hambantota, Kalutara, Kegalle, Matara, Uva, Wayamba.

This is a moment of history in Sri Lanka’s corporate banking where shareholders have agreed to a debt/equity swap along with a parallel interest waiver and capital reduction, an elated Vanik President/CEO Justin Meegoda told Daily News Business yesterday.

This was indeed the facelift that Vanik needed and the company is indeed happy that it has been turned around where there is a drastic change in the ownership structure, he said.

Meanwhile, Meegoda said Vanik was also negotiating with certain parties for the sale of the Capital Reach Group which are also member companies in the Vanik network and those sale proceeds will be used for fortifying some of the other existing subsidiaries of the Vanik Group which, he said, could be turned around with the addition of working capital. The companies within the Capital Reach Group which are earmarked for sale will be Capital Reach Holdings PLC, Capital Reach Leasing PLC and Capital Reach Credit PLC.

There are 10 million shares on offer and we are expecting Rs. 35 per share which will mean that the target will be Rs. 350 million, Meegoda said.

The companies within the Vanik Group billed for restructuring will be Vanik Insurance Brokers, Vanik Information Technologies, Vanik Corporate Services, Vinketh Ltd which is a 100 acre teak plantation company at Madurankuliya in the Puttalam District and Tour East Lanka Ltd an inbound tour operator which has a franchise with a corporate in Singapore.

These are all viable companies which can be restructured with the infusion of working capital of around Rs. 15 million and they will also be performing very well, he said.

He said the rest of the sale proceeds of Capital Reach will be going into interest generating investments along with fee based activities while another part of the funds will be going in for the repayment of the loans to the creditors which currently stands at Rs. 400 million and repayable over the next three years. This is going to be a cash management exercise, he said.