Capital Reach Group to be divested after December 8 IPO:

Vanik to proceed with Rs. 5 billion restructuring

Ravi LADDUWAHETTY

Debt ridden merchant bank Vanik Incorporation Ltd will proceed with its planned Rs. 5 billion restructuring programme following the Appeal Court stay order against the winding up of the company last Friday.

The cause of the earlier case was when HSBC as a Trustee for a certain class of debentures and the Seylan Bank, People’s Bank and the Ruhunu Development Bank in unison and in combination submitted an application to the District Court for the company to be wound up.

The Rs. 5 billion restructuring entails the Rs. 2.7 billion interest waived by the creditors and a further Rs. 2.3 billion which is the cost of the debt/equity swap.

“The company will also hold an emergency Board meeting on Thursday which will discuss the strategies which were held up due to the earlier winding up order given by the District Court, Vanik President/ CEO Justin Meegoda told Daily News Business yesterday

He said this will clear the hitherto obstacle which existed against the implementation of the Restructuring Scheme that has been already approved by the Creditors by a 75% majority and the shareholders and that the Company had commenced the implementation of the scheme when the winding order was given.

“We consider it is encouragement to distressed businesses that take up the challenge and would persevere rather than run away from the problems the adverse economic and political scenario prevailing both in the country and internationally” he said.

Earlier, Vanik creditors agreed to waive Rs. 2.7 billion in lieu of equity in the company to the value of Rs. 1.3 billion as part of the debt to be settled in new shares of the company in the form of a debt equity swap.

By this method, 60% of the debt is gone in lieu of new shares which comes to the tune of Rs. 1.4 billion and the balance debt will also be paid off within the next three years, he said.

The Vanik restructuring will entail the reduction of the existing share capital from Rs. 772 million to 77 million while the new shares issued to the creditors will amount to Rs. 1.3 billion and the total share capital will be Rs. 1.4 billion.

A further highlight of the Vanik restructuring programme is that the Net Asset Value of the Share which currently stands at a minus Rs. 67 will be improved to minus 46 cents.

Vanik will also be divesting its three investments in the Capital Reach Group comprising Capital Reach Holdings Ltd, Capital Reach Leasing Ltd and Capital Credit Ltd but it will be after the Capital each Initial Public Offering on December 8.

“Our investment was Rs. 80 million but our target price is between Rs. 300million and Rs. 350 million and will not sell if we don’t get the targeted price,” Meegoda said.