The Monetary Board of the Central Bank (CB) on Wednesday ordered The Finance Co (TFC) to seek new investors to infuse fresh capital in the form of 40 million ordinary shares at Rs. 40 each
“This is in particular to attract strategic investors capable of infusing funds and playing an effective leadership role in managing TFC,” it said, more than 19 months after taking over the troubled finance company.
The CB said this will also provide an opportunity for approximately 10% of the existing deposits in TFC, to be converted into 100 million non-voting shares of Rs.20 each, thereby converting deposits in the sum of Rs. 2 billion into equity. “While this would enable the depositors to have an equity stake in TFC, which is already a listed company, it will also enable TFC to reduce its current liabilities and improve its balance sheet,” it said.
The CB intervened in February 2009 to stabilize TFC as it confronted problems from the collapse of the Ceylinco Group, which was its parent. The intervention included the appointment of a Managing Agent and the issue of several specific directions to TFC.
“As a result of such interventions, the company has now recovered from the initial shock, while public confidence has been restored,” it said.
The CB said it is time to recapitalize the company in order to facilitate its smooth operations and directed that the company should be managed by a capable Board of Directors representing the shareholders so that the Managing Agent could exit from the TFC operations of TFC as soon as normalcy has been restored.
“The Board of Directors of TFC and the Managing Agent have accordingly been directed to implement the above scheme by December 15. |
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