Business Times

F&G depositors say 'coerced' to convert deposits to shares

By Bandula Sirimanna

Depositors of the Finance & Guarantee (F&G), a regulated company run by Central Bank-appointed agent Merchant Bank of Sri Lanka (MBSL) are up in arms alleging the company is delaying payment of their interest under the cover of a proposed public share issue.

F&G is now in the process of seeking a listing in the Colombo Stock Exchange on the directions of MBSL Chairman M.R. Shah, a senior official of the company told the Business Times.

Several depositors told the Business Times that the company is attempting coercion as a tactic to make depositors convert their deposit liability to equity. Under this initiative 60% or 70% of the deposits will be converted to shares and the company has given a written undertaking to pay an interest of 10% to 12% for the balance amount.

When depositors enquired as to why their December monthly interest is late, they were asked by the officials of the company as to whether they have signed consent forms of the share issue. If the response is negative, they are urged to do so stating that otherwise interest will be further delayed! Depositors say they are shocked at these strong arm tactics by a company managed by Central Bank agents whose brief was to restore public confidence in a regulated financial institution.

However, the F&G official said that the company is planning to make a come-back in 2011 with its share issue set to roll-out soon and denied they were forcing deposits to be transformed to equity. He noted that the repayment of matured deposits of depositors who needs money urgently could be considered after the share issue.

On October 19, 2010 all depositors were addressed by the company urging conversion to enable it to list in the stock exchange or face liquidation. This was in stark contrast to the win - win situation promised by MBSL when it invited investment, issued certificates and defaulted at maturity, depositors said.

Meanwhile depositors of the defunct F&G Property Developers Ltd (PDL) and F&G Real Estate Company Ltd (RECL) who want to make claims from the two trusts set up to settle matters of the two companies on a Supreme Court order have been requested to submit their claims as per the specimen form published in a newspaper advertisement on January 12, a member of the trust told the Business Times.

The completed form and relevant documents should be sent to the Independent Trust of PDL or RECL , Fingara International Cricket Academy Premises 50/21 , Old Kesbewa Road, Raththanapitiya, Boralesgamuwa on or before the 15th of February 2011.

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