Yaddehige sells RPC firms despite vehement denials

With the new purchase, RPC also lost control of its insurance arm, Asian Alliance which now comes under Asia Capital with its 49 percent stake in the insurance company.

The Richard Peiris group sold off Asia Capital Ltd, one of its subsidiaries, despite vehement denials earlier by Group Chairman Dr. Sena Yaddehige saying that ‘neither the company nor its Chairman has any intention of entertaining offers to sell RPC or dispose of any of its business.’

Yaddehige sold 81 percent of Asia Capital which he held directly and indirectly through RPC.

With the new purchase, RPC also lost control of its insurance arm, Asian Alliance which now comes under Asia Capital with its 49 percent stake in the insurance company. Middle management of the insurance company was unsure this week – as soon as the stockmarket deal was announced – as to who was in control of the company.

RPC still has 15 percent in the insurance company. Dr. Yaddehige disposed both Rockport Limited (which owns 25.63 percent of Asia Capital) and Sezeka Limited (which has 25.54 of Asia Capital) when he sold Asia Capital.

A. B .Khalid, closely associated with Vijay Eswaran, Chairman of the controversial multi level marketing scheme, GoldQuest bought 29.98 percent of Asia Capital and acted in concert with Asia Fort Asset Management (Pvt) Ltd (AFAT) and Dato Seri Tiong King Sing (again closely associated with GoldQuest) to trigger the mandatory offer and to takeover Asia Capital, brokers said.

AFAT owns 6.2 percent of NDB Bank and over 51 percent of Taru Villas, an upmarket boutique hotels’ chain.

The directors of Asia Fort Asset Management are Asanga Seneviratne, Manju Seneviratne, Niroshan Wijekoon (Executive Director, Asia Securities) and S Ingram.

The Sunday Times FT in its April 29 story on RPC reported that a combination of management and human resources issues has led to the decision to offload some or all of his companies. The RPC denied the story saying it was a mischievous report and RPC had no intention of selling any of its companies.

GoldQuest
Stock market analysts said that with AFAT’s takeover of Asia Capital which is a relatively well known company in the stock market, GoldQuest is well positioned and stronger than ever before to take over other firms, because of the close association with AFAT.

“When GoldQuest used to buy stakes of companies, they had to undergo much regulatory supervision such as approvals from Securities and Exchange Commission (SEC), Colombo Stock Exchange (CSE) and the Central Bank. Now with the association they have with AFAT, it is easier to buy stakes through a local company,” a stock market analyst said.

Margin Trading
Seylan Bank, following a Central Bank inquiry, has closed the margin trading account that it had opened for Asia Fort Asset Management (AFAT), banking sources said. The regulator had also raised questions as to how a margin trading account could be opened on collateral of a foreign bank guarantee, and operated to buy shares in the stock market.

GoldQuest, the controversial multi level marketing company which has been in the news, together with related parties issued a bank guarantee from a foreign bank to AFAT to obtain a margin trading facility from Seylan Bank about a year ago. “GoldQuest and related parties obtained a US$ 9 million bank guarantee from a foreign bank, in favour of Seylan Bank, which was in turn granted to AFAT to get a margin trading facility from Seylan Bank,” a well informed stock market analyst said.

A margin trading account is where a company or an individual with a certain amount of shares pledge these shares to a bank and borrow against them from the bank to buy further shares.

“For an example, if the share portfolio value of the account is Rs.15 million, a particular bank will give 40, 50, 60 or 90 percent of the portfolio value as funds to buy further shares,” a banker explained. He said that the bank lends money to a certain margin of the particular value of the shares.

“GoldQuest has given a US$ 9 million bank guarantee to Seylan Bank Millennium Branch. The arrangements were that Seylan Bank advances funds in the name of Seylan Bank/Asia Fort Asset Management (Pvt) Ltd,” the industry analyst said.

He said the bank guarantee acted as a security for the margin trading facility for Asia Fort to borrow over Rs. 1 billion which was used to buy John Keels Holdings (JKH) and NDB Bank shares during the past two years.

Meanwhile, the Central Bank had requested information on the margin trading facility whose collateral had dropped in value.

“When the shares dropped in value, the value given to the guarantee also drops. The recent rights issue that JKH had also resulted in the JKH share value dropping and because the security falling in value, Seylan Bank foreclosed the bank guarantee given to AFAT,” the industry source said.

A Central Bank source said that it is stipulated that banks, when opening up a margin trading account, have to consider ‘Know Your Customer’ (KYC) rules, which warrants finding out whether the funds have come through legal channels. “This is to deter money laundering,” he said.

Margin Trading accounts are under the preview of Securities and Exchange Commission (SEC). “These accounts are regularly checked annually by the SEC, but in terms of market surveillance, both the Colombo Stock Exchange (CSE) and the SEC regulate them,” a SEC official said. He also said that usually a bank does not give a facility keeping more than 100 percent of the portfolio value,” he said.