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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Ceylinco assets worth Rs. 4 bn. transferred to SPV to repay GK depositors

Ceylinco assets worth Rs. 4 bn. transferred to SPV to repay GK depositors

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realstock


Senior Equity Analytic
Senior Equity Analytic
Ceylinco assets worth Rs. 4 bn. transferred to SPV to repay GK depositors
On a Supreme Court directive

December 7, 2013, 6:20 pm

BY SURESH PERERA

In an unprecedented boost to the prolonged struggle to repay suffering Golden Key (GK) depositors, the Supreme Court last week directed the transfer of two major Ceylinco Consolidated assets valued at around Rs. 4 billion to the dedicated Special Purpose Vehicle (SPV).

This was the first time since the collapse of GK, a Ceylinco subsidiary in 2008, that two significant assets of substantial monetary value are to be disposed of to raise funds to grant relief to thousands of struggling depositors.

In terms of the court order, 50% of the direct shareholding of J. Lalith B. Kotelawala in CIESOT (Pvt) Limited, the major shareholder of Ceylinco Insurance PLC, worth around Rs. 3 billion will be transferred to the SPV to settle GK investors.

CIESOT’s total shareholding in Ceylinco Insurance exceeds 4.5 million, 50% of which is held by Kotelawala. These are high-value shares with last week’s stockmarket trading price in the range of Rs. 1,283 per share, officials said.

The GK Task Force reported that it was unable to establish the nature of the business of CIESOT and also could not obtain the financial statement of the company. When inquired, Kotelawala denied any knowledge of the nature of the business and KPMG, the company’s external auditors, declined to provide the required financials sans the consent of CIESOT.However, while scrutinizing the major shareholders, it was revealed that CIESOT owns 4,571,891 shares of Ceylinco Insurance PLC, according to its Annual Report 2008 -12, the Task Force said.

The Supreme Court also directed that S&L Investment Company Ltd., and its subsidiaries be transferred to the SPV and Lalith and Sicille Kotelawala and other members of the existing board of directors be declared null and void. New directors should be appointed by GK in their place.

According to the audited financial statement of S&L Investment as at March 31, 2013, the net worth of the company is Rs. 467.2 million, of which Rs. 150 million represents its property, plant and equipment, while Rs. 114.6 million represents shares and investments in subsidiary and associate companies.

The Task Force reported that letters were sent on August 7, 2013 to five banks to seize fixed deposits and debentures under the name of this company.

S&L, denoting Sicille and Lalith was 100% owned by the Kotelawalas. With substantial assets, the existence of this company was declared earlier by Lalith Kotelawala, but not the value of its assets worth more than one billion rupees, GK director, Dushanthi Hapugoda explained.

She said that S&L had a stake in Akasa Kade, Seylan Bank and the 50-perch Elibank Road residence of Kotelawala.

"We are positive of realizing around Rs. 4 billion through the sale of these two major assets", she noted. "This is a big relief to depositors who had gone through agony for the past five years".

An audit revealed that during January-March, 2009, Ceylinco Limited had sold 3.127 million Ceylinco Insurance PLC shares held by them and recorded a profit of Rs. 482.4 million. Kotelewala had siphoned these profits to his benefit through loans given to Ceylinco International Realty Ltd., (Rs. 178.56 mn), Ceylinco Consolidated Ltd., (Rs. 107 mn) and Ceylinco Investment and Realty Ltd., (Rs. 171.2 mn), she asserted.

There was no agreement on this Rs. 456.28 mn loan, no proper procedure to recovery and non recovery of loan during the year or subsequently. It was important to ascertain what happened to the funds transferred to these three companies, the audit observed.

Similar to this fraudulent transaction, the shares of S&L Investment were earlier held by Mr. and Mrs. Kotelawala on a 50-50 basis. In April/May 2009, shares were transferred to one Mrs. Wijeratne and her two daughters. Returns were back dated and submitted to the Registrar of companies and the penalty was paid to justify the transaction, the audit report stated.

This share issue was done to avoid any acquisition by courts to Golden Key depositors, the report noted, while naming the company secretary who did this transaction together with another person, an employee of The Finance Ltd., but who worked in the Chairman (Kotelawala’s) office.

The Supreme Court also directed the transfer of Rs. 130 mn held in a former GK director’s Australian bank account to the SPV. The go-ahead was also given for the transfer of Ceylinco Investment and Realty shares, while sanctioning the sale of the prime De Fonseka Road property owned by Mrs. Sicille Kotelawala. With many potential buyers, this property is expected to be disposed of for Rs. 120 mn by end December, Hapugoda explained.

After the liquidation of these assets, all depositors will be repaid on a pro-rata basis to ensure that all investors, irrespective of their big or small holdings, receive an equitable percentage, she said. "We are condfident of exceeding the expectations of depositors".



http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=93637

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