MBSL Insurance Company Ltd. (MBSLI), a subsidiary of the Merchant Bank of Sri Lanka and Finance PLC (MBSL), was on the verge of collapsing due to serious liquidity issues despite attempts to infuse fresh capital, official sources said.
The operations of MBSLI have been temporarily halted due to inadequate capital. MBSL has little over 84 percent stake in MBSLI.
According to a Colombo Stock Exchange CSE filing, MBSL has already taken proactive remedial action to revive MBSLI and is currently in the process of facilitating a capital infusion of Rs.700 million by way of a private placement of shares with a strategic investor.
MBSLI has called for Expressions of Interests (EOIs) from investors to invest in a significant minority stake in the company, subsequent to which two final bidding offers were received and evaluated.
MBSL said it is working towards receiving the requisite approvals from the line ministry, Insurance Regulatory Commission of Sri Lanka and MBSL’s parent Bank of Ceylon (BOC) in this regard.
“MBSL and MBSLI intend to enter into an investment agreement with selected strategic investor no sooner the said approvals are received,” the filing said.
MBSL said it intends to invest Rs.500 million in MBSLI to meet balance regulatory capital requirement of MBSLI subject to necessary approvals and thereby facilitate the restoration of MBSLI, which is currently suspended.
MBSL said it has already received the principle approval of the Central Bank and the BOC for the proposed capital infusion subject to conditions.