Agalawatte Plantations to raise Rs.2bn via rights issue

Agalawatte Plantations PLC will raise fresh equity capital by way of a rights issue to partly settle its related party borrowings raised last year as part of its restructuring. 

Currently the plantation group has 25 million ordinary shares in issue with a negative shareholder fund of Rs.1.9 billion, the latest financial results up to September 30, 2017 showed.  D R Investment, the owners of Damro, holds 61 percent of the stake in the company. Sonia Ng and DrT.Senthilverl are also among the other minority shareholders.  The mismanaged plantations group under its former Chairman, Dr. Chris Nonis, who was the former High Commissioner to the United Kingdom, last Friday announced it would issue 131.25 million new shares with the proportion of 21 new shares for each 4 ordinary shares held at Rs.15.30 a share to raise a total of Rs.2.0 billion in new equity.

The stock exchange disclosure said the proceeds of the rights issue would be utilised to part settle the related party borrowings amounting to Rs.2.0 billion obtained during April 2017 to December 2017 for the purpose of settling the company’s outstanding bank borrowings, statutory dues and funding the working capital requirements. 

In July 2016, 60.8 percent stake of Agalawatte Plantations was sold by its major shareholder, Mackwoods Plantations Limited to Browns Power Holdings Private Limited, an LOLC group company for Rs.304 million.

But in little less than a year on March 27, 2017 Browns sold its stake to D R Investments, for Rs.275 million.  

The sale was made when Mackwoods group of companies was mired in an ownership tussle, where Dr.Nonis and his family members were at the centre.

Previous management was accused of squandering millions of company owned money on his personal extravaganza such as a heli-pad at Labookellie Estate to accommodate the visit of a VVIP and a villa complex constructed at Culloden Estate.   Agalawatte Plantations manages 15 estates, which include tea, rubber and oil palm covering a total extent of 10,919 hectares and employs around 5,000 workers.  The group had an asset base of Rs.4.3 billion by the end of 2014, down to Rs.3.6 billion by September 30, 2017.  After taking over the company, the new management proposed a debt-to-equity restructuring plan to turn the fortunes of the ill-fated company.  

The new owners sought a 46-year extension to the lease agreement from the government at the expiration of the current 53-year lease. 
The new management also asked for 5 years to settle the outstanding government lease rentals and 50 percent moratorium on the current lease rentals for a period of 5 years until all bank liabilities are settled. 

All other liabilities will also be settled but the board requested to waive-off all surcharges on unpaid EPF/ETF, overdue and penal interest on outstanding borrowings and concessionary rate on balance capital outstanding until full settlements are made. 

This re-payment will only be successful if company generates approximately Rs.400 million per annum additional cash flow during the next five years. 

In the meantime, the new board will also institute legal action against the previous management to recover the funds squandered during their tenure in office and upon recovery of such funds would be utilized to settle the dues. 

For the nine months ended September 30, 2017, Agalawatte Plantations group reported a net loss of Rs.22.2 million, significantly down from a loss of Rs.358.6 million during the corresponding period in 2016.