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FINANCIAL CHRONICLE™ » EXPERT CHRONICLE™ » ASIA CAPITAL IN DISARRAY

ASIA CAPITAL IN DISARRAY

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ddindika

ddindika
Manager - Equity Analytics
Manager - Equity Analytics

ASIA CAPITAL IN DISARRAY 477810

* Hotels owned by ACAP valued approximately US$7.2 mn to be transferred to Japanese investors as settlement to avoid litigation.
* Seylan Bank and other lenders to force sale assets of ACAP to recover US$ 3mn owing to banks.
* ACAP facing severe liquidity crisis as the shareholders funds have fallen below the statutory level required to pass the solvency test.


The listed investment bank Asia Capital PLC (ACAP) is in facing financial crisis as it is expected handover the ownership of all major hotels to Japanese investors as a part of the ongoing settlement. As per this settlement Asia Capital will handover Habitat Kosgoda, Taprobana Wadduwa and River House Hotel to Japanese investors. According to sources these hotels are valued approximately $7.2 mn. Further in 2021 Asia Capital transferred the full ownership Shinagawa Hotel and 5 acre land in Kosgoda to another consortium of Japanese investors as a settlement. Above settlement has resulted in company losing the ownership of all operational hotels owned previously except 12 room Tamarind Hill hotel in Galle which is under a lease. In additional to above settlement, further US$ 5mn remain unsettled with the Japanese investor Tamao Watanabe.These settlement have come as a result of Japanese investors threatening to take legal action recover their investment alleging fraud and mismanagement by the key executives of the company.

Meanwhile the Seylan Bank PLC the largest lender and bankers to Asia Capital have notified its intention to initiate parate action and to force sale the assets to recover loans which has been outstanding and in non performing category for considerable period of time. As per the latest financial statement release by the Asia Capital, the total interest bearing loans amounts to LKR 1.4 billion of which approximately LKR 1 billion due to the Seylan Bank. Directors of the company have been reported to the CRIB.

Further according to the latest financial statement released by Asia Capital to the CSE the company is facing severe liquidity crisis as the shareholders funds have depleted to a level below the statutory level required to pass the solvency test as per the companies act of Sri Lanka. According to sources Asia Capital is seeking loans from its major shareholders to remain liquid and to meet its day to day operational expenses.

The new Companies Act No. 7 of 2007 brought into existence the solvency test into the legal framework of Sri Lanka. This is to be met in a variety of corporate procedures and requires companies to satisfy two tests to be classed as being solvent; the first is the “cash flow” test or trading solvency. The second test is a̳ ssets test‘ or balance sheet solvency, namely that the assets of a company must be greater than its liabilities.

Asia Capital PLC share is currently trading around LKR 7/= where as the Net Asset Value (NAV) of the group as at 30th September 2021 is stated at LKR 3.85 per share. Proposed settlement with Japanese by transfer of assets amounting to US$ 7.2mn is likely to result in negative asset value and possible bankruptcy unless company take immediate action to infuse further equity.

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