Exchange rate mix up leaves Vanik further in debt

Vanik Inc. is asking extra time to pay off its debenture holders, as an exchange rate mix up, left it short of cash after disposing a stake in its Bangladesh operation. Vanik Inc. is asking extra time to pay off its debenture holders, as an exchange rate mix up, left it short of cash after disposing a stake in its Bangladesh operation. On Sept. 29, the ailing company sold four million shares or 15.38 percent in Lanka Bangla Finance Ltd to Sri Lanka’s Samapth Bank at Bangladesh takas 12.50 per share.

The selling price was agreed in May this year, on the basis of the exchange rate announced by Sri Lanka’s Central Bank.

At that time, Sri Lanka’s Central Bank was quoting a rate of Rs. 1.80 for each Bangladesh taka.

“However, at the time we were to conclude the transaction, Samapth Bank insisted that we should use the exchange rate obtained from the Reuter screen which was significantly lower than the rate quoted by the Central Bank,” Vanik said in a statement to the Colombo Stock Exchange on Friday.

The comparative exchange rate was Rs. 1.8538 (quoted by the Central Bank) and Rs. 1.5421 (seen on the Reuter screen).

The exchange loss has now left Vanik Rs. 12 million short of the original expected sale price, its Chief Executive Justin Meegoda said.

Vanik, however, agreed to take the lesser sum, to avoid a three-year legal process.

Due to the shortfall, Meegoda says the company is unable to meet the balance 50 percent due to debenture holders.

Since the payment is large, he says, Vanik needs more than one recovery to meet the shortfall.

Meegoda has asked for six weeks to propose a new payment scheme.

Vanik’s debenture was worth around Rs. 939 million.

-LBO Newsdesk: LBOEmail@vanguardlk.com