MTD selling Colombo Shipyard in limbo
View(s):Talks to divest Walkers Colombo Shipyards Pvt Ltd, the beleaguered MTD Walker’s PLC (MTD) shipping subsidiary, is in limbo with a court case by Commercial Bank (Commercial) hanging over the company.
MTD mortgaged Walker’s Colombo Shipyards (Shipyards) to Commercial for US$4 million to build a shipyard. MTD then sought an Asian Development Bank (ADB) $ 6 million loan to repay Commercial partly and to build Trincomalee and Galle shipyards. ADB’s condition was that all MTD’s shipyards be combined and made a holding company to give the loan.
As a result, MTD combined their Trincomalee shipyard company, Galle shipyard company and shipyards to form Walkers Shipyards Ltd. However, MTD failed to provide certain precedent conditions and corporate documentation to ADB, after which they didn’t grant the loan.
This transaction to transfer the shares to combine the three shipyards and make a new company was recorded in MTD’s 2018 annual report which was when Commercial got to know about the transaction.
In 2019, Commercial went to court saying that MTD had not taken permission to combine the mortgage shares of shipyards to form a new company. They sought a Rs.75 million fine and a re- transfer of the Shipyards’ shares.
Sources close to this transaction noted to the Business Times that MTD’s major shareholders in Malaysia don’t like the idea of re-transferring the shares because Commercial did a Parate execution on shipyards’ assets and if the status quo of the shares is reconstituted, the bank has the right to sell the company.
Meanwhile, the Securities and Exchange Commission’s (SEC) audit to get to the bottom of MTD accounts is happening and the auditors have visited the company several times over the past month and questioned MTD accountants.
“They are probing into some transactions during 2018 and 2019,” a source said. He said that it will likely be completed within this month.
The SEC imposed a Rs.36.3 million compounding fee on directors for breaching four listing rules of the Colombo Stock Exchange (CSE) and violating SEC rule number 6 in the SEC Act which captures the mentioned rule of the CSE. They had paid their dues two months ago. (DEC)