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| Sunday, 24 October 2004 |
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Vanik struggling to survive by Gamini Warushamana Although only two or three debenture holders acting on personal gains and some other ulterior motives have wanted to wind up Vanik the company is coming out of the crisis and therefore at the moment there is no need of talking about Winding up, said Justin Meegoda President of Vanik Incorporation Limited. The Merchant Bank is facing a liquidity crisis for the past 5 years. He revealed these facts at a press conference held on Monday (18). "Winding up a business is easy. But creating a business in Sri Lanka is very difficult because it is hard to find investors and it involves long legal and institutional procedures. Therefore winding up should be taken as the last resort," he said. Only secured creditors would be able to recover their funds if Vanik is wound up at this moment and all other investors corporate and institutional will not even get a cent, he added. Commenting on the crisis faced by Vanik Meegoda said that in other countries this sort of crisis faced by the businesses are not taken lightly by the Governments and authorities. In the case of Baring Bank, the Bank of England did not allow to wind up the bank instead it facilitated for a takeover and saved the Bank. During the East Asian financial crisis many Malaysian financial institutions faced liquidity crisis. But Malaysian government helped those institutions to over come the crisis. Malaysian government formed special institutions to support those business entities, Meegoda said. But our governments and Central Bank (CB) authorities are taking these matters too lightly. Vanik requested support from the previous government to come out of the liquidity crisis it is faced with. It has also submitted proposals to the Central bank. But neither government nor the CB has responded positively, Meegoda accused. The decision to wind up a business cannot be taken only by looking at the balance sheet even if the liabilities are higher than the assets since balance sheet gives a static picture only. It does not show future cash flows of the company. Today Vanik has the ability to generate future cash flows and add value to its assets. It does not show the efforts the business entity has taken to come out of the crisis. The liabilities of the company have been reduced by Rs 5.4 billion and during the period the company has paid Rs.1.2 billion as interest to debenture holders. From year 2000 to October 7, 2004 Outstanding capital payments of the Vanik has been reduced by Rs 4.9 billion during the last five years. Meegoda said that Vanik has reduced its overhead expenses from Rs 18.3 million in 1999 to Rs 6.5 million in 2004 without closing down any of its 15 branches. Top-level staff of the company was reduced by 50% while the company moved to low rent premises. The company is also seeking financial support from foreign investors to overcome the crisis. In the meantime it has diversified its investment portfolio and started several new subsidiaries. Rs.122 million has been invested in Vanik Leasing. Vanik Tel, another subsidiary is selling telephone cards and within the last two months it has sold over Rs 2 million worth of cards. Vanik has also entered the tourism sector. Vanik faced a winding up threat after a trustee of a class of its debentures filed a motion in the District Court in Colombo. The move followed Vanik failing to pay Rs. 15 million interest outstanding since 2002. |
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