CB concern on eligibility of investor eyeing F&G
Disgruntled depositors of the defunct F and G Group of companies (F and G Real Estate and F and G Property Developers) have been protected following observations made by the Central Bank (CB) on the investment proposal submitted to acquire the two entities by a joint venture firm.
The CB has submitted its observations to the Supreme Court highlighting their concerns on the eligibility of the joint venture investor who even failed to submit original or certified copies of relevant documents pertaining to the deal.
The joint venture investor has been directed to submit original documents or certified copies to prove their availability and credibility of funds and clarify their position with regard to observations made by the CB. The Supreme Court will take up the case for hearing on May 2.
The CB has no involvement in the transaction or the selection of the investor as the F and G Board of Directors has been vested with the task of calling for Expression of Interests (EOI), informed sources said.
The F and G Board of directors called for an EOI in October 20, 2017 for the revival of F and G and four investors sent their EOI as per the CB guidelines.
A third party company called “ZRA Holdings” has been recommended to take over failed F and G companies as per KPMG’s final report dated September 26, 2018.
ZRA Holdings partnered with NLH Holdings to acquire the two companies by collectively showing their proof of funds to invest and revamp the said entities.
The CB report to the Supreme Court noted that even though this joint venture has planned to infuse an additional new capital of Rs.500 million within first 12 months, no information has been provided to prove such arrangement.
As per the repayment proposal of ZRA, depositors of both Fand G companies will receive a minimum of 5l per cent and 6l per cent respectively on their principle outstanding deposits.
However ZRA has proposed to pay 20, 30 and 50 per cent of those repayments in three tranches in two years, accordingly the first two tranches will be paid in year l and the final tranche in year 2.
The initial investment proposed in the plan is not sufficient even to pay the first tranche to the depositors of the two defunct companies which is Rs.642.79 million, the CB report revealed.
ZRA expects to utilise the initial investment of Rs.500 million to recommence the business and repayments are expected to commence from the income generated from the revival of business, the CB observed.
The title of NLH has been reported as NLH Holdings (Pvt) Ltd, NLH Holdings, NLH Holdings Co. Ltd and NLH Holdings Ltd in the documents submitted to CB which raises a concern on whether this is the same company or not.
The plan for further capital infusion has not been specified in the proposal and the CB concluded that it is not in a position to comment on the draft Investment Agreement due to those reasons and other factors.
The CB is of the view that the investment agreement could be approved after addressing the concerns raised in this report.
It has been revealed that ZRA Holdings was incorporated in March 2018 and currently not in operation.
However, when some depositors conducted a background check of ZRA Holdings surprisingly they could only find a bare land in their business registered address (163, Muhandiram Road, Colombo 3).
Depositors urged the CB to track down the present status of four of the Ceylinco companies including, NLH Holdings Pvt Ltd, Nations Building Society Ltd, Ceyhomes Credit and Investments Pvt Ltd and Ceylinco Prosperity Pvt Ltd., which were acquired by the same investor eying to acquire the defunct F&G companies which is rich in assets.