Lanka Credit takes over failed CFCL finance company
View(s):Lanka Credit and Business Ltd (LCB) has acquired distressed finance company, City Finance Corporation Ltd (CFCL), which was under the purview of the Central Bank of Sri Lanka (CB) in a landmark deal coordinated by NDB Investment Bank Ltd (NDBIB).
From Left: Ms. Vidushini Denipitiya – (Assistant Vice President – NDBIB), K. G. Leelananda (CEO/Executive Director – LCB Finance), Prof. W. M. Abeyrathne Bandara (Chairman – LCB Finance), Darshan Perera (CEO – NDBIB) and Rukshan Aponso (Manager – NDBIB)
In a media statement, NDBIB, Sri Lanka’s No. 1 investment bank, said it concluded this milestone transaction last month acting as the financial advisor for LCB.
This landmark transaction valued at Rs.1.3 billion could set the benchmark as a case study for the revival of other distressed finance companies in Sri Lanka. NDBIB facilitated all aspects of this transaction including structuring the acquisition to meet the requirements of LCB, securing requisite approvals, negotiating with the CB and coordinating with multiple parties to ensure successful execution of the transaction within stipulated time frames.
This acquisition was structured in three phases to comply with the guidelines provided by the CB, wherein a cash infusion of Rs. 565 million was made initially on April 19 to predominantly settle the outstanding deposit liabilities and the accrued interest of over 2,000 depositors in a staggered manner over a period of 3 years.
Commenting on NDBIB’s involvement in this landmark transaction, K.G. Leelananda, CEO/Director of LCB Finance stated “I am happy that LCB was able to successfully complete this transaction and grateful for the services rendered by NDBIB in advising and structuring this transaction and guiding LCB towards the merger. NDBIB liaised with multiple parties and negotiated with the regulators on behalf of LCB to successfully execute the transaction within the timeframes specified by the regulators”.
The acquisition was completed by the merger of operations of LCB and CFCL via the transfer of the net assets of LCB to CFCL approximately amounting to Rs. 350 million and the merged company was renamed as LCB Finance Ltd (LCB Finance). Additionally, the shareholders infused a further Rs. 400 million in June with the capital expected to reach Rs. 1 billion by end of 2018. LCB has also agreed to a capital augmentation plan with the CB over the next few years and intends to strengthen the governance of the merged company in order to sustain the operations whilst fulfilling its obligations to all stakeholders.
Darshan Perera, CEO of NDBIB, commenting on the successful completion of this acquisition, stated “We are honoured and take pride in playing a pivotal role in the turnaround of a distressed finance company under the guidance of the CB. NDBIB has extensive experience and understanding of the financial services space in Sri Lanka having executed a significant number of transactions in both fund raisings and M&As’ over the years. This sector is something very close to our hearts and we look forward to closing numerous transactions during this year as well as in the future”.
On June 25, the newly rebranded LCB Finance, ceremoniously commenced business operations and opened its new head office in Kohuwala with the participation of many esteemed dignitaries in addition to its branch offices located in the Southern province.