Debt To Be Converted To Equity

 

• Galadari Hotel

By Paneetha Ameresekere

Galadari Hotels (Lanka) PLC which had accumulated losses of Rs. 9 billion in the financial year ended December 31, 2010 (financials for 2011 are not yet out), has won the backing of the share holders to convert its debt into equity. The solution to this effect was approved by share holders at the Special General Meeting held  on Tuesday.
As per its 2010 Annual Report, its loans and borrowings totalled Rs. 6.1 billion, with most of it owed to the two founder Galadari brothers’ (now deceased) families. The Galadari family is the majority shareholder of the hotel.
A source said the Galadari brothers infused funds to the hotel, especially after it was subjected to a terrorist attack in October 1997,  in a sum of US$ 9 million (Rs. 1.2 billion) which was subsequently topped up from time to time. These were loans which came with low interest. However with the depreciation of the rupee the cost of these dollar loans began to accelerate.
Auditors Ernest & Young in their report on the 2010 financials had said that the company’s accumulated losses exceeded its stated capital by Rs. 7.2 billion which effectively made the company bankrupt.