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Busy Wednesday for LOLC finance companies

06 Jan 2022

  • LOLC Holdings to consolidate LOLC Finance, CLC
  • CLC to merge with Sinhaputhra Finance
BY Shenal Fernando LOLC Holdings PLC announced yesterday (5), via a Colombo Stock Exchange (CSE)  corporate disclosure, that it will be consolidating its two finance companies – LOLC Finance PLC (LOFC) and Commercial Leasing and Finance PLC (CLC) – as per the directions of the Central Bank of Sri Lanka (CBSL). According to the disclosure, the CBSL had directed the LOLC Group to amalgamate the licensed finance companies within the group in furtherance of the “Master Plan for Consolidation of Non-Bank Financial Institutions Sector”. Therefore, in accordance with this direction, LOLC announced that it will be taking measures to consolidate LOFC and CLC, subject to receiving the applicable approvals and in compliance with relevant laws and regulations, where the remaining amalgamated entity will be LOFC. Furthermore, CLC also released a CSE corporate disclosure where it admitted that the CBSL had granted approval in principal on 10 December 2021 for an amalgamation of CLC and Sinhaputhra Finance PLC (SFL) in terms of the “Master Plan for Consolidation of Non-Bank Financial Institutions Sector” and that the remaining amalgamated entity will be CLC. Under this transaction, 54.3 million new shares will be issued to the existing shareholders of SFL upon amalgamation. The proportion of such share issuance will be that for every 10,000 SFL shares in existence, 7,803 new CLC shares will be issued. This three-party amalgamation comes at a time when the CBSL is pushing for the consolidation of the non-banking financial sector. Speaking to The Morning Business on Tuesday (4), a highly placed source within the CBSL stated that under the “Master Plan for Consolidation of Non-Bank Financial Institutions Sector”, the CBSL will seek to revive and re-consolidate weak and stressed financial institutions that have major capital adequacy and core capital issues. Accordingly, under this plan, the CBSL is hoping to reduce the number of non-banking financial institutions (NBFIs) in the country from 40 to around 30-25.

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