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Singapore firm seeks rule waiver to take control of EAP media companies
View(s):The Singapore-based Blue Summit Capital Management Pvt Ltd–which has agreed to funnel US$ 75 million into the crisis-ridden Edirisinghe Group of companies–has applied to the Finance Ministry for an exemption to the rule that foreign companies can own only 45% of shares in media companies, authoritative sources said.
If granted, the private equity firm (which claims to have the backing also of an influential local investor whose name has not been made public) will gain full control of the EAP group’s television and radio stations (Swarnavahini, Shree FM, Ranone FM and E FM). At present, only the stipulated percentage of shares has been pledged.
The Central Bank, which is overseeing the deal, has maintained that “everything must be within the laws of the land”. The first tranche of US$ 17 million has already been remitted to Sri Lanka. Another US$ 15 million also came into the country this week and will show up in the books on Tuesday. The rest is expected to be paid by the end of June.
The investors will get control of the subsidiaries corresponding to the payments they make, a Central Bank source said.
Among the companies Blue Summit will gain control of are Swarnamahal Jewellers, EAP Films and Theatres and Swarnamahal Financial Services (SFS). It is expected to provide the Central Bank with a business plan to revive SFS.
Also on the table are properties like the Sapphire Hotel in Wellawatte. It will not take over the bigger financial company, Edirisinghe Trust Investments (ETI), with its Rs 33bn in liabilities. “The investor did not want it,” the source said. The Central Bank is still faced with tackling the woes of ETI’s 25,000 depositors who are now agitating to recover their money. There is a potential investor for company, the Sunday Times learns, but it is too early to say if a deal would come through.
“The best case scenario is to get an investor who plugs the gap and turns ETI into a viable company,” the Central Bank source said, adding that it could not be confirmed whether the rumoured investor would deliver the goods. “A second option is that the depositors will be willing to accept shares and to raise money that way but they are adamant not to do so.”
This leaves the regulator with a final option–which is to use the incoming Rs 11.8 billion to pay off depositors and to liquidate ETI. “Even with Rs 11.8 billion, which we get from outside without any burden on our financial system, the depositors will receive a reasonable amount,” he said. “The deposit insurance will guarantee a payment of Rs 600,000 each, which will cover a fair number of depositors.”
While Rs 11.8 billion is being received for the subsidiaries, the Central Bank feels around Rs 23 billion can be raised. This will also then be distributed among depositors.