Financial Times

Vanik marrying money?
Stockbrokers called the asset transfer by Vanik Inc. of its most profitable subsidiaries to Capital Reach Holdings Limited (CRHL) as selling off the family silver, whereas Nivard Cabraal, Chairman of CRHL, termed it as the troubled company getting "their daughter married to a rich man."

He said that Vanik's shareholdings will be diluted into a minority with Rs 45 million inflows of cash and Vanik will benefit significantly when the companies start to make a profit.

He said Capital Reach Leasing Limited (CRLL) and Capital Reach Factors Limited (CRFL), formerly Vanik Leasing Limited and Vanik Factoring, will seek listing on the second board of the CSE in 2006, along with their holding company, CRHL.

"Vanik is giving the companies over to CRL to make profits, and they will benefit a great deal through this arrangement, because they have a 35 percent stake in CRHL, as well as 25 percent each in both CRFL and CRLL," he said.

Meanwhile, the debenture holders who will remain under Vanik Incorporation Ltd., were concerned about the asset transfer, saying that benefits of the two profitable companies will not reach Vanik in full because of the dilution in shares, which will affect the debenture holders.

Industry analysts said this was the best move for Vanik, which had stretched itself far too thin. The CRLL portfolio stands at Rs.180 million and has been profitable for the last three years.

Nalin Wijekoon of CRLL and Kolitha Perera of CRFL, both Managing Directors, will remain in their positions, while all other directors will resign. Unlike the parent company, some firms under Vanik, such as Vanik Moneybrokers have made profits consistently for the last 12 years, since its inception. However, the profits earned by auxiliary companies are not sufficient to service Vanik's debts. Last year Vanik paid Rs. 540 million to creditors and this year so far it has paid Rs. 500 million. Despite having reduced their liabilities by Rs 5 billion, there are debts amounting to Rs 2 billion more.

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