USD 32.5 million loan approved for UL without application

The Board of Directors of SriLankan Airlines had approved a decision taken by a government committee to borrow USD 32.5 million from the People’s Bank to pay part of a penalty for the cancellation of leases of four Airbus A350-900s though they had not been consulted prior to making that request, the Presidential Commission of Inquiry (PCoI) on irregularities at SriLankan Airlines, SriLankan Catering and Mihin Lanka was told yesterday.

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AGM Corporate Banking of the People’s Bank Kumari Nayana Senaratna said, on April 26, 2016, that R. Semasinghe of the Public Enterprises Department had written to the People’s Bank asking for the above mentioned loan. A letter from the Prime Minister’s office, too, had been sent to the Bank stating that USD 65 million for SriLankan and USD 5 million for Mihin Lanka needed to be given for restructuring, which included paying part of a penalty for the cancellation of the four Airbus A350-900 leases by SriLankan.

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Senaratna said that the Board of directors of the bank had approved the request on April 28, 2016. The Board of Directors of SriLankan Airlines, however, had discussed the matter only on May 19, 2016, the commission was informed.

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Chairman of the PCoI, Justice Anil Goonaratne demanded to know whether the bank had received a loan application from the Airline when the loan was approved. Senaratna, referring to her documents, confirmed that the loan had bee, approved prior to the submission the application.

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Former CEO of SriLankan Airlines, Suren Ratwatte had requested the People’s Bank to convert a rupee loan of Rs. 13.35 billion into a dollar loan in January 2018, Presidential Commission of Inquiry (PCoI) on irregularities at SriLankan Airlines, SriLankan Catering and Mihin Lanka was told, yesterday. AGM Corporate Banking of the bank Kumari Nayana Senaratna said that the loan had been taken in 2015 to settle fuel bills. The airline had failed to pay back the capital of the loan though by January 31, 2018 it had paid an interest of Rs. 3.93 billion.

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She said that on January 04, 2018, Ratwatte had written to the bank asking us to convert this into a dollar loan. He said that SriLankan was planning to team up with a foreign investor and it would be easier if everything was in dollars. He also asked the bank to offer a lower interest for the dollar loan and to extend the period in which the loan has to be paid. We started working on it, received Treasury approval as well.

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The PCoI questioned Senaratna whether it was judicious for the Airline to do that given the depreciation of the rupee and the appreciation of the dollar.