Shares in Colombo Stock Exchange listed MTD Walkers (KAPI) have been halted from trading since February 14th. Investors are still awaiting information on when the stock will start trading again, if ever.
The debt filled construction company has been mired in controversy for several months, as they have reported massive losses, been the subject of litigation, and been embroiled in a conflict of interest scandal with regards to massive loans taken from People’s bank.
The company is a financial time bomb for the banking sector with close to Rs40bn in liabilities and an equity base that has almost been completely wiped out after repeated staggering quarterly losses.
News of an impending sale of assets has forced banks to file action and obtain enjoining orders against the company to prevent asset stripping that was likely to leave the banks subject to large credit losses.
MTD Walkers is one of many Sri Lankan companies that are in financial distress and engaged in suspect conduct with regards to lenders. Banks have seen an increase in non-performing loans, with further sharp increases expected.
If the financial sector is to remain stable, analysts say they need to move quickly to work through non-performing loans, take losses, liquidate assets and move on. If they fail to do so, there is a risk of large losses for depositors (or government bailouts) as in the case of ETI and other financial giants that have collapsed.