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Fri, 31 October 2014 17:20:11
Sri Lanka bank loan to public private partnership goes bad
28 Nov, 2012 08:06:38
Nov 28, 2012 (LBO) - Sri Lanka's Seylan Bank Plc, which came under state stewardship following a run is trying to recover 418 million rupees loaned to a public private partnership involving an Australia based party, a public notice shows.
Seylan Bank in a notice published in Sri Lanka's Daily Mirror newspaper said it was auctioning equipment from Auslanka Paper Company (Pvt) Ltd, to recover a defaulted loan and interest at 31 percent.

Auslanka Paper Company (Pvt) Ltd, is an entity incorporated with Perth Engineering and Maintenance (WA)(Pvt) Ltd, an Australia based firm, to revive a defunct paper mill in Embilipitiya owned by state-run National Paper Corporation.

A press release said in February 2012 that the firm started production with "orders from several state departments."

Seylan Bank in said in a public notice that its board had resolved to recover 418.48 million rupees and interest at 31 percent, owed up to October 09, on a mortgage bond dated February 2012.

Most of the machinery advertised for sale had been manufactured nearly 15 years ago, in 1997, according to the newspaper notice. It is not clear how the firm ended up with 15-year old equipment.

Sri Lanka stopped privatizing loss making state enterprises transferring full business risks to private owners under a new policy from 2004 and instead started so-called 'public private partnerships' where the state retains ownership.

Earlier officials have said that the Australian firm would 'invest' 600 million rupees to revive the paper mill and pay a 4 percent lease rental for the land following a valuation.

Seylan Bank itself came under state stewardship after a run and a surge in bad loans and was recapitalized with public and private equity.

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