Nation Lanka shelves deposit-to-shares conversion plan
View(s):The plan to convert deposits / borrowings of Nation Lanka Finance PLC (NLF), previously Ceylinco Finance PLC to non-voting shares with the consent of the Central Bank (CB) has been shelved by the company following its rejection by depositors and creditor who claimed that it is worthless, depositors of the company said.
They added that the company has sent a letter requesting them to convert a minimum of 50 per cent of total outstanding balance into non-voting shares of the company stating that it was on the directions of the CB.
They alleged that this was the normal prescription given to all ailing finance companies by the CB. A similar scheme was proposed to the now defunct Central Investments and Finance PLC which was also rejected by depositors.
In a letter dated July 1, the CB noted that NLF misguided the depositors by including incorrect statements on the monetary board approval in the letter sent by the company to depositors requesting them to convert deposits in to non-voting shares. It directed NLF to convert deposits of each depositor into non -voting shares but approved a proposal of the company to convert 50 per cent of total outstanding balance of Rs. 900 million of deposits/ borrowings into non- voting shares, with the consent of depositors. The CB also rejected the NLF proposal to offer 15 per cent bonus shares for 100 percent conversion and 5 percent bonus for 75 per cent conversation.
An NLF official said the plan was shelved as the depositors did not given their consent and were now paying back the money to depositors.
Meanwhile the CB has conducted a forensic audit recently and it is now being assessed by the regulatory authorities, informed sources said.
NLF’s annual report said that accumulated losses as of March 31, 2013 were Rs.1.6 billion. The company had been able to increase its deposit base during the year to Rs.2.64 billion from Rs.1.98 billion a year earlier and its lending base to Rs.1.67 billion from Rs.1.02 billion the previous year.