CB rejects claims by TFC on “potential investors”

The Central Bank ( CB) on Wednesday rejected claims by The Finance Company ( TFC) that it has been informed of three potential investors to resurrect the troubled finance company.

“Even though news articles mentioned that TFC informed the Colombo Stock Exchange ( CSE) that it has been approached by three interested parties to consider investing in the company, no such proposals have been submitted to the CB, so far. Therefore, the CB wishes to clarify that the information published in the articles in newspapers and news websites regarding any potential investments is not true and correct,” it said.

In a notice posted on the CSE website on November 25, the TFC said that since the publication of the “Notice of cancellation” by the CB, the TFC was approached by three interested parties to consider an investment on the basis banking licence could be obtained with the sufficient investment.

That statement said: “TFC is continuing to facilitate potential investors locally and overseas. Some discussions with potential investors are continuing. The Board of Directors of TFC has requested the CB to re- consider the notice of 30 days and avoid any licence cancellation and request 60 days of extension from the date of issuance of ‘Notice of Cancellation’, while assisting us to finalise the investors soon after the existing political situation settles.

“We wish to further inform that the CB has responded on November 21 to our objections dated November 14 and stated the following facts.

1) TFC was severely affected by the failure of a number of financial institutions within the Ceylinco Group in 2008. Since then the financial status of the company deteriorated gradually leading to a severe liquidity crisis. Although several efforts were made to identify prospective investors and to restructure the company by the CB since 2009, such efforts have not materialised to a satisfactory level yet. 2) It was informed that the document in relation to the proof of funds for the capital infusion submitted by the said potential investor had some concerns and TFC was requested to submit confirmations to the CB from the banks in which the said funds are deposited and available for investing in TFC, via their corresponding local banks, on or before October 23 and TFC has not submitted the bank confirmations on the proof of funds from the said potential investor for their investment in TFC, to date.”

The CB statement on Wednesday said that the CB issued a notice of cancellation of the licence granted to TFC to carry on finance business under the Finance Business Act No. 42 of 2011 ( FBA) on October 23. The CB also informed that in terms of the provisions of the FBA, the company has the right to submit an acceptable proposal for investment in TFC along with proof of funds for capital infusion and a Business Restructuring Plan for the consideration of the CB within 30 days from the date of issuance of such notice.

“In view of the above, the CB wishes to inform that in terms of the FBA, the Monetary Board shall take a decision on the notice of cancellation issued to TFC after the expiration of 60 days from the date of notice of cancellation,” the banking regulator said.