PTL earned massive profits by selling TB to State institutions: DSG

Deputy Solicitor General (DSG) Milinda Gunatilake yesterday led evidence before the Treasury Bond Commission suggesting that Perpetual Treasuries Limited(PTL) has recorded phenomenal profits by selling Treasury Bonds to the Employee’s Provident Fund (EPF) and other State institutions at low yield rates in November 2015, April and March 2016.

DSG Gunatilake said in the periods, there are no sales of Treasury Bonds recorded where PTL has sold bonds higher than at 10.01 yield rate. Drawing evidence from a document submitted to the Central Bank, including details of the outright sales of PTL in the period, DSG Gunatilake pointed out to the commission that PTL has not done any outright sales below the yield rate of 10.01 other than the EPF.

Gunatilake said PTL has given higher yield rates such as 10.91, 10.95, 10.85 to all other market counter parties where as it has sold to EPF at low rates, the highest among them being a 9.31 yield rate in November 2015. According to Gunatilake, no other party in the bond market has bought from PTL lower than 10.50 yield rate other than EPF.

Answering to Gunatilake, Perpetual Treasuries Limited Chief Executive Officer Kasun Palisena said the suggestion “may be correct. But the market could have changed within the buying and selling dates. A market can change in hours or even minutes,” Palisena said.

Gunatilake taking on an outright sale on June 11, 2015, pointed out to the commission that the capital gain made by PTL from selling to EPF, was Rs. 19, 378, 200. In the same sale, PTL has recorded a gain of Rs. 87, 469, 500 by initially selling the bonds to W.M. Mendis and Company. When PTL bought back the same bonds from W.M. Mendis and company, the said party has recorded a capital gain of Rs. 2,005,200. The details were extracted from the capital gain report given to the Central Bank by PTL in 2016.

Palisena in reply to the above suggestion said he might have to check the transaction process. Gunatilake said: “If you are denying the process or the gains, I suggest that the documents you provided to the Central Bank is wrong.”

Taking upon another outright sale by PTL, Gunatilake pointed out how PTL has sold a bond with same ICIN at different rates to EPF and other market parties. Accordingly, on June 11, 2015, PTL sells at a 10.50 yield rate to EPF whereas selling the same to other market parties at 11.50.

Commissioner, Supreme Court Judge P.S. Jayawardena questioned the witness on the same matter. Pointing out to an outright sale of 50 million worth bonds on November 6, 2015 by PTL, Justice Jayawardena asked if the transaction was a sell and buy back. According to Palisena, the transaction “most probably” would have been a sell and buy back.

Justice Jayawardena: all along you have been happily identifying most of these deals as sell and buy backs. This transaction has the same deal number and the same date?

Palisena: Yes.

JJ: So, accordingly, you will buy back the bonds you sold on sell and buy back agreements?

P: Yes. But some were rolled over as well.

JJ: So, look at this deal, you will buy back the bonds you sold, on November 13, 2015?

P: This deal was rolled over.

JJ: So, it means on this agreed transaction on November 13, 2015, there was no such buy back?

P: Yes.

DSG Gunatilake: That bridges the gap where we could identify some cancellations of buy back agreements.

Meanwhile, on Monday, evidence was led suggesting that PTL has incurred losses in inter-company transactions where it transferred its profits during the period from February 1, 2015 to March 31, 2016. The loss incurred by the profit transfer, DSG Gunatilake suggested, was amounting to Rs. 700 million. 

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