The Colombo Stock Exchange (CSE) halted trading of MTD Walkers’ shares on Thursday after calling for clarification—albeit belatedly—about recent events at the troubled conglomerate.
Separately, the Commercial High Court issued enjoining orders in favour of eight banks, restraining MTD Walkers PLC from transferring any of its shares in any of its subsidiaries to its Malaysian parent company until it settles billions of rupees in debt to the lenders.
They are Commercial Bank of Ceylon PLC, Selyan Bank PLC, DFCC Bank PLC, National Development Bank PLC,
Bank of Ceylon, People’s Bank, Sampath Bank PLC and Nations Trust Bank PLC.
On January 21, MTD Walkers made a corporate disclosure to the CSE about a related party transaction that had taken place on January 11. It said the company will transfer 100 percent of its shares in Walkers Shipyards Ltd, Northern Power Company (Pvt) Ltd and Colombo Fort Heritage Company (Pvt) Ltd to its parent MTD Capital Berhad in Malaysia for US$ 19,098,710.83 (more than Rs 3.3 billion). MTD Capital owns of 90.78 percent of stated capital of MTD Walkers PLC.
The incoming funds were to be deployed to settle the debts of another subsidiary, CML-MTD Joint Venture Ltd, as part of a restructure. But the monies were, in turn, owed to the Exim Bank of Malaysia Berhad (according to the disclosure) and would flow back out of the country.
The corporate disclosure itself came several days late. While the transaction was dated January 11, the disclosure was filed on January 18. Just the previous day, the CSE had questioned MTD Walkers whether it had engaged in undisclosed price sensitive business activities or transactions that had caused its share price to rise (it had been climbing since mid-January).
And the company replied that it had “not engaged in any undisclosed price sensitive business activities or transactions to escalate the share price and does not have any knowledge of the reasons for such an increase in the rice of the share and the volume of the shares traded, as intimated by the Colombo Stock Exchange”.
The plaintiff banks point out that main or substantial assets of the defendant, MTD Walkers, comprise shares held in those three companies. They want their dues settled before any transfer takes place.
The Commercial Bank plaint also asserts that MTD Walkers is “fraudulently alienating the shares” set out in its corporate disclosure on related party transactions “in order to avoid payment of the sums of money” owed to the institution. It maintains that the company does not have adequate security to meet the bank’s claim and is attempting to receive monies after the sale of the said shares and transfer these funds abroad.
Major changes have been taking place at MTD Walkers–founded in 1981–since last year. It gained two new directors on December 27 amidst reports that the Malaysian investors will shed shares in coming months: Kumaragewattage Sharm Viraj Fernando and Yogendraprasath Sathiyaseelan filled two of three vacancies created by the resignations last year of Niranjan Joseph de Silva Deva-Aditya (Nirj Deva), Albert Rasakantha Rasiah and Hewawasamge Ravindranath Srilal Wijeratne.
Mr. Sathiyaseelan is the Chief Financial Officer of Supreme Global Holdings which is headed by R M Manivannan. Mr Fernando is the Managing Partner of Sharm Fernando Associates. The firm’s Financial Consultant is Sumith Ranwatta, who is also the Managing Director of Chart Business Systems (Pvt) Ltd, the company secretarial firm engaged for some time by the Supreme Group.
By the end of September 30 last year, MTD Walkers had Rs 4.2 billion in long-term debt and Rs 23.6 billion in short-term borrowings. Around Rs 22 billion is due from trade and other receivables. It has to receive Rs 6 billion from the Urban Development Authority alone, for three completed housing development projects.
According to the company’s fourth-quarter results, MTD Capital Berhad is still the major shareholder. The other top nine are Kiran Atapattu, Standard Chartered Bank Singapore, A A M Razik, Sezeka Limited, MBSL/ H W R S Jayawardena, Mrs C A D S Woodward, Sena Yaddehige, Mrs P A S Amaratunga and National Development Bank of Sri Lanka Limited.