Over USD 100 million obtained by SriLankan were not settled - Witness

Four loans amounting to over USD 100 million obtained from the People’s Bank by SriLankan Airlines (SLA) since 2015 have not been settled so far, the Presidential Commission of Inquiry into alleged malpractices at Sri Lankan Airlines, Mihin Lanka Pvt. Ltd and SriLankan Catering learnt yesterday.

Three loans amounting to USD 100 million and one loan of Rs.13.35 billion had been obtained by the company in 2015, 2016, and 2017 on different purposes, including settling the fuel cost for the Ceylon Petroleum Corporation.

Assistant General Manager (Corporative Banking) of People’s Bank Kumari Nayana Senaratne testified before the Commission yesterday.

SriLankan Airlines was incurring heavy losses since 2008 after the management of the company was taken over by the then government from the Emirates Management. These losses resulted in the company having to face many problems, including a financial crisis.

In such a situation,in July 2015, the company had asked for a Term Loan of Rs.13.35 billion from the People’s Bank citing that it was in a need of money to settle the cost for fuel owed to the Ceylon Petroleum Corporation.

The bank, on the approval of its Board of Directors had issued this loan to the CPC as requested by SriLankan Airlines on a Letter of Comfort (LoC) which expired on March 31, 2016 issued by the Central Bank (CBSL) as a security. However, the company had been failed to repay this loan amount by the date of expiry of the LoC. Later, the CBSL on a claim lodged by the bank had extended the validity period of the LoC time by time till December 31, 2018 due the continuous failure of SriLankan Airlines on the repayment. However, the Commission came to know that although, at least one cent of the capital payment had not been settled, the company had paid Rs.3.9 Billion as the interest for this loan amount by January 31, 2018. The People’s Bank however, told the Commission that this loan is not yet considered as a non-performing loan.

The second loan amount of USD 32.5 million had been issued by the bank to SriLankan Airlines on two letters of request issued by the General Treasury and the Prime Minister’s Office as per a discussion held with the Treasury Secretary in April 2016 for the Restructuring of SriLankan Airlines, including the payment of compensation for the cancellation of the lease agreement on A350 airbuses. This loan had been issued by the People’s Bank in the same month on the approval of its Board of Directors on a LoC valid till April 30, 2017. The validity period of this LoC had to be extended time by time till December 31, 2018 due to the non-payment of the loan. By January 31, this year SriLankan Airlines had been able to settle an amount of USD 3.10 Million as the interest.

The third loan of USD 42.5 million was issued by the bank in August 2016 on a request made by the then CEO Suren Ratwatte for Working Capital. This was also issued by the bank on a LoC valid till October 7, 2017 as security and the validity period of the LoC too had been extended time by time on the failure of the repayment by the company. However, an amount of USD 3.25 Million had been paid as the interest by the company by January 31, 2018. SriLankan Airlines again on March 7, 2017 via a letter had requested an amount of USD 25 million as a loan from the People’s Bank to recover the loss it faced due to the closure of the BIA runway. In the same way, the LoC issued as a security for this loan too had been extended due to the failure of repayment. The amount of interest had been paid for this loan by the end of January this year is USD 1.18 million.

However, on the inquiry of the Commission, the Assistant General Manager was of the view that these loans will be settled by SriLankan Airlines as there is an involvement of the Treasury with these deals. 

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