Rehabilitation of sick businesses need systematic approach - CEO MBSL

GAYAN KANCHANA

Sick business can be defined as business units which perform poorly against expected results, incur cash losses for consecutive years, gradually erode the entire net worth and obviously fail to service the debt obligations, Merchant Bank of Sri Lanka (MBSL) PLC CEO Gamini Karunathilake said.

Gamini Karunathilake

He was speaking at a seminar on “Sharing experiences on rehabilitation of sick businesses” which was organized by MBSL yesterday.

Main concern of the seminar was the recent Sri Lankan experiences on how rehabilitation of sick businesses was effectively implemented by Merchant

Bank of Sri Lanka PLC during a period of 10 to 15 years.

“To identify a sick business several major factors can be considered. Among them the major criteria is the unit incurring financial loss that is not being able to produce at or above break even point.

Karunathilaka said, “A business provides income to society in the form of taxes, employment opportunities and support for the community projects. It helps sustain a community. Thus, when it is threatened by liquidity related problems, the threat extends to the community.

To rehabilitate a business we have to consider models such as the Indian, English and American models. Among them the American model is the most valid and it gives the maximum possible opportunity for the business to survive as viable entities.

Rehabilitation is not a common solution for sick business entities.

It may work or not. Hence, rehabilitation of sick business units should be well planned and systematically approached,” he said.

MBSL PLC Chairman Janaka Ratnayake said, “We are on a rescue mission. We have been successfully restructuring number of financial companies.

When analyzing the situation of these companies there are many causes for the failures. They have accepted around Rs 200 billion from the public and invested in their own businesses ventures which are not profitable,” he said.