Nation Lanka looks to divesting assets to meet capital adequacy

Nation Lanka Finance PLC (CSF) is currently evaluating the possibility of divesting some of its holdings in order to raise funds to strengthen its capital adequacy requirements, a top official said.

“The Board is currently examining various avenues to address the remaining compliance requirements with regard to Tier 2 capital adequacy and liquidity. 

This includes the possibility of divesting some stocks and unprofitable subsidiaries,” CSF Chairman Jayantha Dharmadasa told the shareholder in the company’s latest annual report. 
CSFhad raised Rs.502 million through a rights issue this March to meet the Tier 1 capital adequacy requirement.

The rights issue increased CSF’s Tier 1 capital to 9.8 percent and Tier 2 capital to 9.8 percent. 
Dharmadasa said that the company has already negotiated an agreement to sell its fully-owned subsidiary Nation Lanka Equities (Pvt) Limited for a consideration of Rs.160 million to increase the Tier 2 capital adequacy ratio.

“We are looking into viable solutions regarding our other loss making subsidiaries, First Lanka Treasuries and Ceylinco Towers. As we cannot divest these companies, we are examining the possibility of liquidation and sale of assets,” he added. Dharmadasa said that CSF is also looking at private placement of debt through debentures or preferential share issues to raise Tier 2 capital.
The annual report noted that the company is planning to raise a further Rs.250 million through debentures this year.

Capital adequacy ratios across the Sri Lankan financial system have gradually deteriorated due to the extremely high levels of private credit.