SriLankan Catering IPO blocked by Treasury at last minute: inquiry
ECONOMYNEXT- A public listing of the catering unit of SriLankan Airlines in 2011 to raise 42 million dollars was blocked by the Treasury at the last minute, de-railing a restructuring and planned cashflows of the carrier, an official told a commission of inquiry.
Head of Financial Management Yasantha Dissanayake, testifying at a Presidential Commission of Inquiry, said that the initial public offering (IPO) for SriLankan Catering was ready to launch, with applications submitted to the Colombo Stock Exchange and the Securities and Exchange Commission.
"It was ready to go but the Treasury rejected it," he said.
Then Chief Executive Manoj Gunawardena had planned the IPO, and the Bank of Ceylon had done a lot of work as the manager for the issue, Dissanayake said.
"A lot of work was done. We converted some director positions to independent directors as per listing requirements and a prospectus was done," he said.
Upon questioning from Senior Deputy Solicitor General Niel Unamboowe, Dissanayake said he believes the Treasury had given the initial go ahead for the IPO, which sought to list 40 percent of SriLankan Catering to raise 42 million dollars.
He said during this period, SriLankan Airlines was facing a negative net cash flow which was worse than budgeted each month, and its equity was beginning to deteriorate.
He said that fuel prices were rising after falling in 2009, putting pressure on the airline’s costs.
"The IPO which was to come never came. That made the problem worse," he said.
Dissanayake in earlier testimony had said that a 2008 business plan formulated by Gunawardena and then Chief Financial Officer Senaka Chandrasekara sought to raise 50 million dollars by listing minority stakes of SriLankan Catering and SriLankan Ground Handling and another 30 million dollars by listing a small stake of SriLankan Engineering.
However, Dissanayake yesterday said that then Treasury Secretary P. B. Jayasundera had halted the business plan, saying he preferred a more aggressive one.
Jayasundera had also prevented bonds given for re-structuring to be sold to raise cash for current spending, the commission heard. (Colombo/Sept27/2018)