Depositors at Ceylinco finance companies have been flooding the phone lines with complaints of late interest payments, no interest payments altogether and several difficulties in getting their capital back.
Although the industry has been hit hard, insiders told The Sunday Times FT that the six finance companies which come under the Ceylinco Group are all experiencing far greater difficulties after the Golden Key Credit Card Company collapse and alleged fraud which has seen Group Chairman Lalith Kotalawela and several directors remanded. Insiders say The Finance Company, once an industry leader, is having several problems, especially since there were inter-company transactions with Golden Key which has affected the operations of the entire Group.
One key reason for the problems is the Group’s high exposure to real estate coupled with a downturn in the market. The Central Bank’s (CB) stimulus package for finance companies has indicated that Lankaputhra Development Bank will buy real estate from companies who want to sell at 67% of the market value. Some companies are not involved in real estate at all although the industry average for exposure to real estate is around 10%, markedly lower than the Ceylinco Group finance and leasing companies whose exposure is close to 40%.
“They were doing well and getting good profits in the past but now, there will be a certain loss,” one industry analyst said. “Even getting 67% of the value is okay because it would help their liquidity.” Another problem is real estate buyers have also run out of money and are unable to make full payments despite having put up advances.
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