Golden Key opts for a new business model amidst protests from depositors
The defunct Golden Key Credit Card Company (GK) will move a new business model after the completion of the Phase 3 repayment of Rs 100,000 each for all depositors with security deposits in the company up to Rs. 3 million, new directors appointed with theconsent of the Supreme Court, said.
The company aims to collect at least Rs. 2.5 billion from the sale of the partially completed four-storied Children’s and Women’s Hospital building on 619 perches at Kirimandala Mawatha, Colombo 5; a 60- acres of teak plantation in Puttalam; properties belonging to former directors Padmini Karunanayake and Kavan Perera; a quarry at Narammala; a property at Hokandara and three floors at Ceylinco House. Other assets include some properties of former GK directors and another owned by ex -Ceylinco Chief Lalith Kotelawala.
“After the completion of the cash repayment phase of depositors by June this year, we will commence the process of crediting money from the sales of assets to the individual accounts of security deposit holders in accordance with the repayment action plan of the Central Bank,” GK CEO, Central Banker – Migara Handunge said.
Completing the GK assignment, Mr. Handunge is to return to the Central Bank to resume his normal duties next week after handing over the GK functions to newly appointed Chief Operational Officer (COO) Dinesh Perera.
He told the Business Times that a sum of Rs 358 million was paid to 4063 depositors with security deposit balance of up to Rs. 3 million under the Phase-3 of the repayment plan as at March 2014.
Another sum of Rs. 207.1 million will be paid to 2071 depositors next month, he said.
He disclosed that during the second half of this year GK will function on a self-sustaining basis generating an income to meet operational expenditure to maximise the repayments to depositors.
With the raising of Rs. 2.5 billion capital, the company will implement a business plan with or without an involvement of a strategic investor, Dushanthi Hapugoda, a Director of the company and also a depositor, said adding that this will add value to security deposit balance money of depositors that will be converted into shares of the company.
But it was unclear what the company would do after settling all the depositors in addition to converting their shares (against their wishes) and no details of the business plan has been divulged.
According to the payment plan, all current individual net balances up to Rs. 300,000 will be retained within the security deposit holder’s account.
If the balances are in excess of Rs. 300,000, 33.3 per cent of it will be retained in the security deposit holder’s account and the balance 66.7 per cent will be converted into shares of GK.
“We want to get more value to shares of depositors at the stock market by implementing a new business plan after reviving the company to provide more relief to suffering depositors,” Ms.Hapugoda said, adding that “the aim of the board of directors to repay more than 41 per cent of the security deposits” .
She revealed that under the self- sustaining model they will continue the maintenance of the Golden Key Eye and ENT hospital at Rajagiriya and several subsidiaries of the GK while realising the assets of S&L Ltd with a net worth of over Rs. 467 million.
However she said that the secretary of the S&L company has so far failed to hand over documents relating to share transactions although the Supreme Court has directed him to do so.
Meanwhile in response to a request made on behalf of depositors by Jude Marco Perera and Malcolm de Silva to appoint a depositors representative committee to extend their services in the efforts to realize GK assets and monitor the functions of the company, Chief of Presidential Staff Gamini S. Senarath has sent a letter to the Central Bank Governor Ajith Nivard Cabraal to take necessary action towards this end.
But GK CEO,– Migara Handunge and Director Dushanthi Hapugoda said that there is no need to appoint such a committee as the task force and directors appointed with the consent of the Supreme court is fulfilling this task.
She said that such a committee will disrupt the whole process and it will affect the present activities of the company.
Mr. Handunge noted that the GK special purpose vehicle is functioning under the supervision of the Central Bank (CB) and two office bearers of GK depositors associations are serving as directors.
Therefore the involvement of a depositor’s representative committee will not arise, he added.
President of the GK Depositors Hope and Solidarity Organisation Jude Marco Perera noted that they are demanding to appoint this committee as they are in a positision to find and also reveal more hidden assets of the GK and its former directors including Lalith Kotelawala.
He revealed that according to the Ernst & Young audit report the net balance of security deposits as at 31-12 -2008 was Rs. 25.2 billion and after deducting the two previous repayments of Rs..100,000 to depositors the balance came down to Rs. 23.8 billion.
But the three depositors who were appointed as directors of GK SPV have accepted the total liability as Rs. 7.8 billion causing a loss of Rs. 15.9 billion to depositors knowingly or unknowingly, he disclosed, adding they were opposed to this assertion. He noted that the intervention of a depositors representative committee was needed to avoid such losses and to make all functions of the company transparent.
The value of the net balance amount of 8171 depositors who made requests for repayment from the CB after deducting loan balances and Sarana Fund payments was Rs. 25.3 billion.
He said that justice could be done to all of them by deducting the rebate considering the total balance outstanding of each and every deposit holder without cutting 59 per cent from the deposit as a flat rate.
Mr. Perera was also insistent that there are enough assets here and abroad of the failed company and its directors to meet all liabilities. “Give us a chance and we’ll prove this,” he told the Business Times.