Link: http://lankabusinesstoday.com/corporate/announcements/1829-no-platinum
FRIDAY, 11 MAY 2012 05:00
By Jithendra Antonio
May 11, 2012 (LBT) - Sri Lanka’s one time booming post war bullish stock counter GREG or the much famous Environmental Resources Investment PLC (ERI) recently disclosed that company is going to bring back and investment worth US 19.8 million or nearly approximately Rs.2.47 billion it pulled out from the island nation to buy a company registered in British Virgin Islands (BVI), one of the tax havens in the world.
In a filling to Colombo Bourse, the statement by ERI/GREG said that further to the announcement made on 11 August 2011 pertaining to the disposal of shares in Environmental Resources Limited (ERL) in BVI Environmental Resources Investment PLC announces that the Minister of Finance has granted permission in terms of the provisions of section 17(2) of the Exchange Control Act for the disposal of the 11,874 (23%) shares held by the company in ERL to Photon Global Limited in BVI.
However the release also said that it is subject to the condition that the company should repatriate the total purchase consideration of US $ 19.8 million (or approximately) Rs.2.47 billion to Sri Lanka out of which US $ 3.1 million (or approximately Rs.387.5 million) should be received immediately after the disposal of shares and the balance sum of US $ 16.7 million (or approximately Rs.2.08 billion) within a period of one year from 24th January 2012.
The notice added that Photon Global Limited has accepted the aforesaid conditions and that the said initial payment of US $ 3.1 million has already been received by the company from Photon Global Limited as an advance payment against the purchase consideration.
Earlier on 11 August 2011 ERI/GREG in a disclosure to Colombo Stock Exchange said that the board of directors of the company has decided that it is in the best interest of the company to dispose of the shares in Environmental Resources Limited (ERL) BVI.
That time the notice added that the decision to dispose was made based on the improving business climate with the overall local economy as the company’s (ERI/GREG) primary focus is on local investments.
It was further revealed that ERI PLC (GREG) has paid up to three tranches for 11,874 (23%) shares totaling Rs.2,059,324,720 (US $ 18,123,477.10). The notice also added that the disposal of the total 11,874 shares is subject to regulatory approval from the Controller of Exchange and the Minister of Finance of Sri Lanka.
At the time it was also revealed that the purchasers of the shares would be Photon Global Limited BVI and ultimate beneficiary being Lionhart Investment Ltd who is also the major shareholder of ERI PLC (GREG). The company noted that the expected sale price is approximately US $ 19.7 million with a capital gain of US $ 1.7 million for ERI PLC.
Compounding and Investigation
On early September 2011 Sri Lanka’s market watch dog Securities and Exchange Commission (SEC) said that it has carried out an investigation into Environmental Resources Investment PLC (ERI/GREG) and compounded the company, its chairman and the two executive directors.
The offences committed by the company were contravening the Listing Rules of the CSE as well as certain SEC rules pertaining to non-disclosures and dissemination of misleading information to the CSE relating to certain material information concerning the company. That time the statement by the SEC said that the two executive directors, Dr. Kosala Heengama and Scott Newsome were fined Rs.3.3 million each while the company paid another 3.3 million. Further Dr.Kosala Heengama’s father ERI/GREG Chairman Lalith Heengama was also fined Rs.500, 000.
“SEC has imposed the maximum fine it can inflict upon ERI under the present rules and regulations, which is Rs.10 million” a SEC spokesman had told at the time to reporters.
The move came after much popular Environmental Resources Investment (ERI) PLC (GREG) sold its major stake in a Eastern Platinum Ltd; a platinum mining company through its offshore investment company, Environmental Resources Ltd. in British Virgin Islands (ERL BVI) according to market sources. That time reports outlined Environmental Resources Investment (ERI) PLC sold a portion of its foreign owned stake at Eastern Platinum Ltd amounting to 22 million shares through Toronto Stock Exchange (where Eastern Platinum Ltd is listed) and that money which ERI owned Environmental Resources Ltd in British Virgin Island would be utilized for a new investment.
However, Environmental Resources Ltd. registered in British Virgin Islands had 24 million shares of Eastern Platinum valued at US $ 35.5 million (nearly Rs.4 billion) according Environmental Resources Investment (ERI) PLC Annual Report for the Financial Year ended in 2010. Meanwhile, as per old reports nearly 32 million shares of Eastern Platinum had changed hands in Toronto Stock Exchange on January 18, the date of which Environmental Resources is said to have done the transaction according to market sources.
After the reports on 24 January 2011 a disclosure signed by Dr.Kosala Heengama said that Environmental Resources Investment PLC wishes to announce with regard to ERL BVI a company incorporated in the British Virgin Islands which is part of the ERI's investments ; that ERI/GREG has an agreement for the purchase of the entirety of the shareholding of ERL for a maximum price of US $ 76 million of which approximately US $ 18 million has been paid to date.
The notice added that ERL BVI has disposed of 24,048,760 shares of Eastern Platinum Limited (ELR) which is one of ERL's investments on the Toronto Stock Exchange (Public –TSX; ELR; ISIN # CA2768551038) at a price of Canadian Dollars 1.72 per share for a total consideration of Canadian Dollars (CAD) $ 41,363,867.20.
The notice attached with a letter from Deutsche Bank AG Colombo Branch added that the sale of settlement of the funds to Environmental Resources Limited BVI (ERL) have been confirmed on 24th January 2011 by Deutsche Bank AG Colombo; the custodian of the shares.
Hedging Game?
In July 2007, UK Based Hedge Fund Manager, Lionhart Advisors Group headed Lionhart Investments Ltd. acquired a controlling stake in Sri Lanka’s Walker & Greig, a low performing listed shell company at the time by retiling it as Environmental Resources Investment (ERI) PLC, for Rs.76 million and had turn around Sri Lanka’s Colombo Bourse at the peak of its performance since end of war while making the ERI PLC a group that come in to rescue and acquire Sri Lanka’s sick companies such as Dankotuwa Porcelain PLC (DPL), Ceylon Leather Products PLC (CLPL), Colombo Pharmacy PLC,DNH Financial (Pvt) Ltd, Enterprise Technology (Pvt) Ltd, Olancom (Pvt) Ltd, Roomsnet International (Pvt) Ltd, and South Asia Textile Industries Lanka (Pvt) Ltd.
However that time in July 2007 Lionhart Advisors Group headed Lionhart Investments Ltd bought little over 75% stake in Sri Lanka’s Walker & Greig Limited (GREG), the old established Colombo firm founded in 1854 which was long controlled by Brown & Company Limited.
That time it was disclosed to Colombo Bourse by both Walker & Greig and Browns (established in 1875) about Lionhart's purchase of slightly over 13 million shares of Walker & Greig amounting to just over 75% of the company on June 28.
At the time of purchase Walker & Greig which had net assets per share of Rs.1.73 in its last published balance sheet was virtually a shell company. In the past Walker & Greig which had held valuable agencies including Gillette later changed following change in ownership of their foreign principals and it was a losing company within the Brown's Group which was then controlled by LOLC (Mr. Ishara Nanayakkara), Mr. Ajit Devasurendra, previously of First Capital and Mr. Vartharajah Somasunderam along with Former Bank of Ceylon General Manager Rohini Nanayakkara who was the Chairman of Browns.
However on January 2009 again Environment Resources Investment PLC (ERI/GREG) said it had entered into an agreement with Brown & Company PLC to sell "Walker & Greig (Pvt) Ltd" which company was incorporated on 31st October 2008 and owned by Environment Resources Investment PLC. The company further informed that all business dealings, assets and liabilities of Environment Resources Investment PLC have been transferred to Walker & Greig (Pvt) Ltd and the sale was concluded on 8th January 2009.
Later in August 2009 Environmental Resources Investments PLC (ERI), announced it was acquiring 100% of Environmental Resources Limited (ERL), “A company incorporated in British Virgin Islands and holding assets of equity and debentures focusing in the platinum mining industry in South Africa, including Eastern Platinum Ltd”. The statement added that 52% of the asset base of ERL consist equity of Eastern Platinum Limited.
Accordingly, ERI agreed to pay US $ 76 million to acquire all of British Virgin Island based ERL from Osiris International Trustees (OSTI) over a period of time through an installment payment of ten tranches with Sri Lanka’s Exchange Control Approval while ERI PLC had so far paid 3 tranches via the ERI’s rights issues and warrant conversions on 6 April, 19 May, 2 November 2010 in the sums of Rs. 432,454/-(US $ 6,426,740.24) and Rs. 714,792,266 (US $ 6,261,868.30) and Rs.606,100,000 (US $ 5,406,779.66) to OSTI to date.
That time to raise the money needed to pay for the new acquisition ERI/GREG had six warrants allowing warrant holders the ability to buy ERI/GREG shares at pre determined prices over the next five years. And Dr.Kosala Heengama in an interview with media had said that ERI estimates it can raise US $ 385 million during that time of which US $ 105 million dollars are due by April 2012.
“Environmental Resources Investments (ERI) will use most of its planned Rs.44 billion new equity injections in the next five years to acquire and turnaround ‘sick’ Sri Lankan firms and to purchase a platinum mine investment company registered in a tax haven in the Caribbean” Its Directors had told at the time to reporters. “So come April 2012 BVI (British Virgin Island) unit is paid off and we will have a lot of extra cash to do a lot of, I think, fun and exciting things.” Dr.Kosala had told reporters back on 1 April 2010.
However, later although the Warrant 2010 got subscribed ERI/GREG delayed by up to six months Warrant 2011 that were to be converted to shares on June 2011. The decision to delay the conversion was passed at an extraordinary general meeting of the warrant holders of the company, which is 85 percent controlled by Lionhart Investments. The conversion date was changed from May - June to July and December 2011.
Again for the second time in a year, Sri Lanka's Environmental Resources Incorporated (ERI) said it plans to delay warrants (Warrant 2012) that were to be converted to shares whose price has slumped to the conversion price, amid anticipation of selling pressure on June 2012. The company said its directors decided on January 5 to recommend extending the cut-off date of is 2012 warrants from February 03, 2012 to September 6, 2013. It also recommended extending the expiration date of the warrants from February 24, 2012 to September 26, 2013. It said the board of ERI was "of the view that it would be in the best interests of the company if the 2012 warrants were fully exercised."
It was also obvious that the controlling shareholder of ERI, Lionhart Investments, didn’t subscribe to its full entitlement of warrants. Later on 3rd February 2012 Sri Lanka’s markets regulator imposed trading restriction on 2012 warrants of Environmental Resources Investments (ERI) after the firm said it wants to delay their conversion to shares.
Since end of war, on the other hand, Lionhart Investments continued to remain as the biggest foreign investor in Sri Lanka’s stock market being the major shareholder (over 80%) of Environmental Resources Investment (ERI) PLC until Malaysia's Khazana Nasional Fund bought 8.85% stake of premier bluechip John Keells to the tune of US $ 115 million or Rs.14.34 billion on March 2012.
On the sidelines according to global hedge funds sources, Lionhart Hedge Fund uses Toronto Stock Exchange as a capital market platform where the Hedge Fund could gain 'high profits in a short period of years and exit at the right time' through divesting its stakes in listed companies in Toronto.
Link: http://lankabusinesstoday.com/corporate/announcements/1829-no-platinum
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