Central Bank to restructure, recapitalise and sell troubled Entrust Securities
Auditor KPMG, under the aegis of the Central Bank (CB), is carrying out an audit on the beleaguered primary dealer Entrust Securities Ltd based on which the regulator will restructure, recapitalise and ultimate sell off the unit, a top official said. CB Governor Arjuna Mahendran told the Business Times on Wednesday that Entrust has been ‘quarantined’ (operations isolated from other Entrust Group companies) and the audit will reveal the exact position, after which a restructuring plan will be set by the CB. “We will find out the exact position in about a months’ time,” Mr. Mahendran told the Business Times.
The National Savings Bank, directed by CB to take over management and formulate a restructuring plan for Entrust Securities, is in the process of undertaking a financial due diligence, the state bank said in announcement. In the meantime Mr. Mahendran, explaining how the process would take place, said that laws to set up a ‘Troubled Assets Fund’ are being drafted and the plan is to take over the Entrust’s bad/impaired assets through this fund, obtain Treasury assistance to recapitalise the company and then sell it.
The CB isn’t ‘short’ of parties eyeing Entrust and the regulator plans to sell it to a bank, a finance company or a local/international buyer. “We aren’t short of interested parties. There’s not one, but several,” Mr. Mahendran said. Last week Entrust was seized by the banking regulator after it was unable to show enough assets to settle liabilities. With the change in government last year, some institutions had made some mass-scale withdrawals from the organisation. “Then cash flow problems started,” an Entrust source told the Business Times. It’s said that over Rs. 6 billion of the Entrust funds are unaccounted for and the CB officials said that they will also look at recovering of the assets.
Sycophants
Some others see CB’s attempts to sell Entrust as politically motivated. “There are certain parties close to Cabinet Ministers who are ‘eyeing’ firms at Entrust that are run fairly well,” an informed source told the Business Times. According to him these parties have already set these wheels in motion. A blame game is on at Entrust Group as to who was responsible for what happened at Entrust, but there’s no denying that financial greed by power hungry sycophants had managed to grind Entrust to a halt. Meanwhile the CB has urged the police to impound the passports of former Entrust director Chanuka Ratwatte and other current directors in view of a current probe into the company, Mr. Mahendran said. He said that this case has been handed over to the Criminal Investigation Department (CID) with a recommendation that the passports of Mr. Ratwatte and other current directors be impounded pending the completion of the probe.
Mr. Ratwatte, a son of former Cabinet Minister, the late Anuruddha Ratwatte, is said to have been the power behind the company. He resigned from the board last October. Mr. Mahendran said that Entrust was ‘slapped lightly’ in 2013 (with a warning) when the CB had initially noted their lapses and they had gotten away with the connections to the former regime. The trouble started last year with the regime change. Entrust was warned last April, prohibited from doing certain things and directed to submit a restructuring plan. According to sources close to Entrust, Mr. Ratwatte’s directorship at Entrust (he doesn’t own any shares) was solely dependent on his connections and what he could ‘do’ for Entrust. “He was roped in because he had connections with the highest authorities,” an Entrust source said.
Multi Finance looks to divorce Entrust
Entrust Group’s Multi Finance PLC, a 41-year old finance company, has requested the Central Bank (CB) to ‘realign’ and divorce’ itself from the ‘Entrust’ holding, sources close to Multi Finance and CB officials said. In a bid to distance itself from the Entrust Group, Two independent directors at Multi Finance (Kuvera de Zoysa and Mohan Ratnayake) along with other officials met the CB on Wednesday and recommended that common directors of these two firms be removed. The common directors at Multi Finance and Entrust Securities are Isira D. B. Dassanayake, Romesha Senarath, Niroshan Mendis, Sanjeewa Dayaratna and Mano Thilakawardena (independent director).
The sources said Multi Finance is well-run, doing well and the company was keen to find new investors in a realigning process. Mr. Mahendran said that Entrust Group has some 15-20 companies and Multi Finance, which was acquired by Entrust (when it was Ceylinco Sriram under the Ceylinco Group) isn’t in trouble. He added that it needs to be verified whether Multi Finance has intercompany borrowings etc with Entrust and then a decision on their request to realign will be met. When some Multi Finance depositors called CB to find out if this company was stable, an official had told them that it’s not and to pull their cash out. When Mr. Mahendran was made aware of this by the Business Times, he said that it isn’t true and that he will inform his staff of the position. “This isn’t correct, there’s no problem with Multi Finance,” he told the Business Times.