To finance dollar-based initiatives like the West Container Terminal in Colombo, John Keells Holdings (JKH), one of Sri Lanka’s largest corporations, would borrow 75 million US dollars from a Canadian financial institution through privately placed debentures.
While the crisis-stricken and sovereign debt defaulting economy is frantically seeking dollars to cover its necessities, such as fuel and cooking gas, Fairfax Financial Holdings Limited, situated in Canada, will lend the necessary dollar.
John Keells will issue 208.2 million debentures, each at 130 rupees to Fairfax Financial Holdings Limited.
The convertible debentures will accrue interest at a rate of 3% per annum.
“The proceeds from the issue will be used to support the Company’s investment and financing obligations, particularly in terms of managing the foreign currency linked funding requirements in investments such the West Container Terminal (WCT) in the Port of Colombo,” JKH said in a stock filing on June 21.
JKH will invest 70 million US dollars in 3.2 million twenty-foot equivalent container terminal in the WCT joint venture in the Colombo Port, taking a 34% stake with the majority is being held by India’s Adani group.
The 650 million US dollar Colombo West International Container Terminal (Pvt) Ltd, will be 70/30 debt to equity funded.
India’s Adani will hold a 51 per cent stake and Sri Lanka Ports Authority the landlord will hold a 15 per cent stake.
The conversion of the debentures to newly listed ordinary shares will take place within 18-36 months from the date of issue of the instrument by the company to the investor.
JKH said the funding will strengthen its financial position amid a worsening dollar crisis worsens and higher interest rates.
“The Proposed Private Placement will enable the Group to support this investment pipeline and match its foreign currency linked project costs whilst reducing the need to fund some of its requirements through the local banking sector given the stresses on capital and interest rates.” The debenture will mature in 3 years.
