SriLankan Airlines partner may be in place by year end
ECONOMYNEXT – A partner to turn around Sri Lanka’s loss-making state carrier may be in place by the end of the year, with private equity firm TPG Capital being selected through an international bidding process now being the sole contender.
Deputy Minister for State Enterprises Development Eran Wickramaratne said the selected PE firm has been given the nod to begin a due diligence examination of SriLankan Airlines, a process that may take up to three months from March.
"After that is done, the company will then suggest their terms. Then, negotiations will start," he said. "We will have to give ourselves a few months on that. I would say it will be the end of the year before all processes are finalized. In that negotiating process only we will know what kind of balance sheet they are looking at to make the company profitable."
"At that time, the shareholder – the government – will decide how much of debt they are going to leave with the company and how the shareholder will take away."
Finance Minister Ravi Karunanayake has said that Sri Lanka’s government would retain a 51 percent stake. Investors who took less than 51 percent had had an unhappy experience with privatized firms in Sri Lanka especially with subsequent administrations.
SriLankan Airlines was managed profitably by Emirates until 2008, who also had a 40 percent equity stake.
SriLanka’s ex-President Mahinda Rajapaksa ousted Emirates management over a spat involving seat allocations for a presidential delegation, and the firm has since run up losses of over 120 billion rupees.
Japan’s NTT, which took over and re-structured SriLanka Telecom, also sold out.
Sri Lanka’s government has said that an interested airline may also contact a ministerial committee, as it would like an airline to be involved.
Minister Wickramaratne said the private equity partner itself may bring airline management expertise, or tie up with an airline.
"The solution can come from one party, or it can have multiple parties," he said.
Private equity firm generally had a short timeframe and would usually look to exit, he said. (Colombo/Mar21/2017)