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LOLC out of the race: Rs. 3 bn. cash infusion by end August
Insurance Corp, BOC and NSB to take Seylan equity

The Insurance Corporation of Sri Lanka (ICSL), now back in government hands following a Supreme Court judgment, will join the Bank of Ceylon (BOC) and the National Savings Bank (NSB) in infusing new capital into the Seylan Bank further stabilizing that institution which successfully weathered a run on its deposits following the Golden Key collapse, authoritative official sources said yesterday.

The Central Bank(CB) which offered a third of Seylan to prospective bidders willing to infuse new capital into it in return for management control and going above the statutory limit on bank ownership had reduced the original five bidders into just one – Lanka Orix Leasing Company – but could not agree with LOLC on the terms of a takeover.

The CB in a Stock Exchange filing on Friday therefore announced that some unidentified state owned institutions will take the Seylan stake on offer and said the current Board will remain in office.

This board comprises Messrs. Eastman Narangoda (Chairman), R. Nadarajah (executive director), Nihal Jayamanne, PC, Lalith Withana, Naomal Goonewardena and Rear Admira (Retd.) B.A.J.G. Peiris.

Although LOLC had succeeded in associating the International Finance Corporation, a World Bank affiliate with whom it has had a long and strong relationship and FMO, the Netherlands Development Finance Company, which had joined together with LOLC in micro credit subsidiary, to associate themselves with the bid for Seylan, it had not succeeded.

``The fact that IFC and FMO were willing to come in with LOLC sends a strong signal about the strength of LOLC as well as the value of Seylan,’’ a financial analyst said yesterday.

Well informed sources said that among the issues that were not agreed upon between the CB and LOLC was the pricing of convertible preference shares that were to be issued by Seylan.

The CB said in its Stock Exchange filing last week that Seylan has been directed by the Monetary Board to issue "an appropriate number" of voting shares to generate a capital infusion of Rs.3 billion into the bank by the end of August.

Although CB did not identify the state institutions that will come in, well informed sources identified them as the Insurance Corporation that will take the most number of shares, the Bank of Ceylon which will take a lesser number while the NSB, already a shareholder of Seylan with 3.47% of its voting shares and 3.67% of its non-voting shares, will take the least.

Existing shareholders of Seylan will also be given the opportunity of investing in the new shares that will be issued in a proportion of one new share for every two already held at a price that has not yet been determined.

However, unlike in the case of a rights issue, shareholders not willing to take up their entitlements will not be able to renounce them in favour of any other/s of their choice.

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