With the divestiture of Seylan Merchant Leasing Ltd (SMLL) to Peoples Leasing Ltd (PLL), SMLL’s main shareholder Seylan Merchant Bank's (SMB) liquidity position will improve from its current levels, according to a senior SMB official.
"Our non disclosure agreement to sell SMLL stipulates a due diligence by PLL. This will be concluded by the first week in April,” Rohan Senanayake, Deputy Chairman SMB told The Sunday Times FT. He said the reason to divest 79% of SMLL that SMB owns was because of the present financial crisis. "We are trying to build liquidity at present. This is the reason we took a decision to divest it." He said SMB has a profitability and a liquidity problem. “As at 31st December 2008, we had Rs. 406 million excess funds after paying liabilities. Now our deposit retention is at 30% (from the previous 70%)."
He said after the divestiture of SMLL (which has adequate liquid assts under Central Bank guidelines), SMB will not need money and its liquidity position will improve tremendously. When asked why SMB Real Estate was sold to Ceylinco Capital Markets Ltd (CCM), he said there were three reasons to do so. "We were recommended by the regulator about two years ago to divest SMB Real estate, because this business did not come under core banking. Being a subsidiary of Seylan Bank, SMB was not encouraged to carry out businesses which are non bank related. Also real estate markets have dropped, which was a concern," he explained.
He said the third reason was the need for SMB to create liquidity. "Up to 19th December we did not experience a liquidity crisis. After the Golden Key crisis, the confidence factor dropped," he said.
When asked whether major shareholders were informed of this sale, he said 51% of SMB is owned by Seylan and Seylan was informed. He also said CCM, to which the real estate firm was sold to has, himself as the Deputy Chairman. |
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