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F&G Real Estate arm faces Liquidity Issue
Finance & Guarantee Company Limited of Ceylinco Group is a company which is involved in financial services including leasing, hire purchase, housing loans, personal loans, educational loans, business loans, accepting fixed deposits and savings accounts, real estate development & property development and housing construction. In the wake of concern by depositors of Golden Key Credit Card Co. Ltd., the investors of F&G have also started to withdraw their funds since December 2008.
F&G Co. Ltd. heads the Finance & Guarantee Group of Ceylinco Consolidated, along with its own subsidiaries. Ceylinco Consolidated took over in far back 1980′s the original Finance & Guarantee Company at the behest of the Central Bank of Sri Lanka, since it was marked for liquidation 20 years ago. Since its resurrection, the financial institution was however well on its way to success. It is an approved finance company by the Central Bank of Sri Lanka.
Apart from F&G Co. Ltd., Daily FT learns that F&G Real Estate Company Ltd. and F&G Property Developers (Pvt) Ltd. have been also involved in accepting fixed deposits as a ‘Return on Investment’ (ROI) scheme. F&G Real Estate Company Ltd. and F&G Property Developers (Pvt) Ltd. are not registered as financial institutions under the Central Bank of Sri Lanka.
When Daily FT spoke to the key officials of the F&G Group they said that they have been accepting funds from people on the strength that both F&G Real Estate Co. Ltd. and Property Developers Ltd., related entities, are operating mega scale apartment projects and real estate projects which have been a solid investment opportunity for the last 20 years. “We offered an extra 2% to 3% per annum more than a registered financial institution’s interest rate as we had a higher return on investment in our real estate projects on sale. “ Deputy Chairman, F&G Group of Ceylinco Consolidated, Mervyn Jayasinghe told Daily FT adding that investors of such projects were offered an interest payment annually based on their invested value. He went on say that company is strong enough to payback depositors on a timely basis as both subsidiaries have assets more than the deposit portfolios in all three companies.
“In all three companies the total investments of depositors are valued at Rs. 10 billion and there are approximately 6,000-7,000 depositors. We can definitely pay them back. We are not going to runaway from this country or companies. But if every investor comes to get their refund at the same time, we cannot sell our assets overnight ;not even a registered bank in the world would be able to dispose their assets immediately” Mr. Mervyn Jayasinghe said.
The official noted that there is a trend in global markets where the real estate market value comes down in every 20 years. “Now we are facing the same situation when considered the present market context. Real estate prices come down but this is the best time for real estate investments. According to Mr. Mervyn Jayasinghe the F&G Group’s real estate investment portfolio is approximately 60% of its investments.
Speaking to Daily FT, one of the depositors’s (who did not wish to be identified) of the F&G Real Estate Co. Ltd said that the company has failed to pay the interest payments since December 2008. “They did not pay interest for deposits even at maturity. On 17th February all the depositors (approximately 200) were invited to the head office to pay back the interest payment but when the officials of the company did not do so, we encircled them and blocked their way. Later on Deputy Chairman of the F&G Group came and told us that they have three plans to overcome the issue in the company. He convinced us that one of them is to bring the F&G Real Estate Co. Ltd. and Property Developers Ltd. under F&G Co. Ltd. and regularize it under the Central Bank supervision. “The other option is to settle the depositors investments via a foreign fund worth Rs. 65 billion from a European country which is still in the negotiating process with Ceylinco Group according our sources. “ Mr. Chalaka Sanjeewa Perera of F&G told us that they are receiving some foreign funds from Vatican since last December. When we questioned whether European countries were interested in investing in companies with difficulties, the officials of the F&G were of the view that European Countries are interested in developing countries such as India, Pakistan and Sri Lanka.” Our source said that “The third option of the repayment plan is to dispose of all the assets of company “. When Daily FT questioned whether the Sri Lankan ex-cricketers and cricketers have signed up for mortgage bonds against the mega assets of the company as a security for their large scale investments in F&G Group, the Deputy Chairman, F&G Group of Ceylinco Consolidated, Mr. Mervyn Jayasinghe said that “Though we have some of such cricketers signed up for mortgage bonds, the company has the authority to sell those assets and repay them their interest.”
Speaking to Daily FT, Mr. Mervyn Jayasinghe concluded that with repayment scheme will be published in the newspapers and all these activities will be conducted in a transparent manner and that with the blessing of state financial institutions and Central Bank, the company will take immediate actions to regularize its non registered two subsidiaries. In the wake of the general scenario among Ceylinco subsidiaries and depositors’ dilemmas, the question still remains how far this ‘viral behaviour pattern’ amongst depositors affects the Ceylinco Group’s assets and subsidiaries and whether they are going to get their return back soon.
News Published Under: Banking and Finance, Real Estate Developers, Real Estate India | No Comments »