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Central Bank yet to rule on EAP Group sale
View(s):While senior officials of a Malaysian company, brokering a deal to buy the crisis-hit EAP Group, were in Colombo last week for further discussions, the Central Bank (CB) said they are yet to reach a decision on the sale of the two Finance companies owned by the group.
The EAP Group has been in negotiations to sell its businesses to Singapore’s Straits Grid Pte Ltd, in a deal brokered by Kuala Lumpur-based businessman Jaya Sudhir Jayaram.
“We are not involved in the negotiations. That is between ETI (part of EAP Group) and the investor. We are only looking at the source of funding as per our rules, and that process is not complete,” a senior CB official said. The banking regulator has been checking the source of funds to ascertain whether it conforms to the Prevention of Money Laundering Act No.5 of 2006 and the Convention on the Suppression of Terrorist Financing. Act No.25 of 2005.
In other cases too, the credibility of the source of funding has been a bone of contention, whenever investors came forward to take over failed finance companies such as the Central Investment & Finance Ltd (CIFL), for instance.
On January 1, 2008, the CB took over management of ETI Finance Ltd (ETIF) and Swarnamahal Financial Services PLC (SFSP) due to a mismatch in its liabilities and assets, and to stop a run on the deposits, after concern by depositors grew. The banking regulator froze withdrawal of deposits, but allowed the payment of interest on deposits.
The sale of the cash-strapped group which includes EAP Films and Theatres, Swarnavahini (TV) and several radio stations, hinges on the resolution of the crisis at its two Finance companies.
Informed sources said that Mr Jayaram has been in and out of the country and last seen in Colombo two days ago, along with others involved in the negotiations, the sources said, adding that, their meetings were probably with the EAP group and not the CB.
Mr. Jayaram was briefly arrested, along with three others, at the Bandaranaike International Airport on November 30, 2017, trying to smuggle out foreign currency.
Dollar notes amounting to US$ 50,000 were found in his hand luggage and two others–one of them his son–also had US$50,000 each in their possession. The fourth carried US$58,000, making it a total of US$208,000, according to a Sunday Times report. He was released on political pressure and had agreed to present himself at an inquiry.
Customs officials were not immediately available for clarification on that case and its aftermath.
The gap between liabilities and assets at the two Finance companies is said to be about Rs 12 billion, and the investor offer for the EAP Group is in the region of US$60 million (about Rs 10 billion), a large slice coming from the UK-based Lyca Group, owned by Sri Lankan-origin Allirajah Subaskaran, a high profile player in the mobile network space operating in 21 countries worldwide. The Lyca founder is a powerful financial backer of Britain’s Conservative Party.
Sources close to the negotiations say that, if the deal comes through, Lyca would have a 60% stake, with the balance being held by the Singapore firm.
Lyca was also involved in plans last year to buy Hutch, the struggling mobile service provider, but its offer of US$ 140-150 million failed due to a counter-bid of US$168 million by SLT-Mobitel, coupled with political pressure. The SLT-Mobitel offer for Hutch also didn’t work due to bank funding constraints, sources said.