The Securities and Exchange Commission (SEC) yesterday directed the Colombo Stock Exchange (CSE) to hold the proposed Rs.3 billion-debenture issue by EAP Broadcasting Company Limited.
The decision was prompted by the prima facie conflict of interest in the rating of the proposed debenture issue by Lanka Rating Agency (LRA).
“The said conflict of interest arises from having a common director of the respective boards of directors of both the issuer company and the credit rating agency, and two of the directors of the issuing company being members of the Rating Committee of LRA,” the SEC directive stated.
Accordingly, the SEC directed the CSE to differ the opening date of the subscription of the debenture issue scheduled for June 11, until a rating on the issue is obtained from an independent credit rating agency registered with the SEC.
SEC last week stopped LRA issuing new rating reports until the credit rating agency complies with the regulatory requirements imposed by the SEC.
LRA is one of the three credit rating agencies operating in Sri Lanka along with Fitch and ICRA Lanka.
The main objective of the debenture issue was to raise funds for EAP Broadcasting to invest in and redevelop the properties of the EAP group.
EBC had received a rating of ‘BBB’ for the debt issue from LRA.
On May 26, CSE said it gave provisional approval to list the debt securities of EAP Broadcasting.
The company was planning to raise the money in two tranches—each Rs.1.5 billion.