MTD Walkers setting the record straight

With due reference to the article in Daily FT of22 February by the Senior Management of the Walkers CML Group, virtually in reply to my write up on the same issue in this paper on the previous day, I wish to further elucidate the following in order to dispel any misconceptions. 

This becomes necessary due to the fact that the Senior Managers of the Group are stressing the justification of their action to an intention of “fostering an environment where factually sound and objective dissemination of information is encouraged with particular reference to how the company, and the company’s stakeholders are overcoming current obstacles”.

In the context they are referring to the onset of some loud, partisan and inflammatory reporting on their company over the course of past eight months. While completely dissociating myself with any such moves by any one I only have to add that I reaffirm what I have written wholeheartedly since the explanations provided do not in essence counter any of the matters I have commented on. 

It appears that the SMs have already lost much time and failed in their duty if such a step was warranted at any stage before. Because for some time now the activities of this Group has come under the Public FOCUS withdifferent newspapers, electronic media reporting about this matter and the SEC’s statements and restriction of share transfers of this company on many occasions before.

The situation was further complicated when last week it was reported that eight leading banking institutions in the country have filed action against the Group claiming that the Defendant Company owes money to them, which had been taken as loans by this Group and have not been settledwith interest. 

The banks also had pleaded for a permanent injunction on the Group and its servants and agents from ceasing to be registered as the owner of the shares until the full obligations to them are settled. In other words banks appear to be suspecting a move by the company to transfer shares which would endanger the rights of the banks to recover their dues.

It should not be to the pleasure of anyone to see the downfall of a business organisation although such happenings are not uncommon in the business world. The explanation offered by the company gives an impression that they are distressfully engaged in portraying the history and the fact that they have remained united in realigning their operations in order to continue in the business. The readers get the message clear that they were faced with severe adverse conditions requiring course corrections. 

It also appears that they are making an effort to attribute their debacle to the current macro-economic turmoil. By this statement they are passing a stricture on the governance forgetting the fact that there are many other business organisations that continue their affairs without falling into deep red as they are.They also attempt to give an impression that they are continuing to build and reshape Sri Lanka’s infrastructure! What a preposterous goal for a company struggling for its own survival!

They also emphasise the historical importance of the Company they have subsequently acquired. This does not mean anything since there are several instances of bigger conglomerates with longer histories crashing. Business organisations can belong to any phase in their lifecycle such asslump, recession, recovery, or boom. Some more unfortunate ones are nowhere in these phases, which may be due to their going bankrupt. Several glorified business houses have lost their fame in the past, and even though they remain exemplary, their contemporary value is limited to history. 

Given below is a list of the top 10 famous companies that went bankrupt(based on information extracted from business world records).

1. Lehman Brothers, 2008

Lehman Brothers, the company with a value of $600 billion and one of the world’s largest financial corporations, filed for bankruptcy in 2008. The news sent shock waves around the world, and within no time, the company shares dropped by a whopping 94 percent which headlined the 2008 global financial crisis. 

2. General Motors, 2009

General Motors based in Detroit, was one of the biggest car manufacturing companies of the world. With operations in more than 157 countries, and more than 209,000 employees, the company eventually experienced a drastic decline in car sales, and was lead to file bankruptcy in 2009. After receiving good government financial aid, the company came back on track with the horror of bankruptcy behind it.

3. WorldCom Inc, 2002

WorldCom Inc, once the largest US-based telecommunications companies, went bankrupt after its revelation of $4 billion expenses, wrongly. It had more than 20 million customers, and 80,000 employees. At the time of bankruptcy, it was considered as one of the largest and very famous companies in USA, with a value of $100 billion.

4. Pacific Gas and Electric Co., 2001

Established in 1905, the Pacific Gas and Electric Co. was a profit making corporation until the deregulation of electricity began. It had to sell off its natural gas plants and only retained the hydroelectricity plants. With all this the electricity generating capacity of the company declined, eventually leading to bankruptcy.

5. Enron, 2001

USA’s recent biggest bankruptcy case ever was that of Enron. The company was established in 1985, grew in leaps and bounds, and became the seventh largest company of in terms of revenue. It bought electricity from generators and sold it to customers for earning the humungous profits it did. In order to keep getting credit, it kept away $500 million in debt, which was kept off the book, but once the amount exceeded $638 million, the Securities and Exchange Commission opened an investigation. The rest is history.

6. RefcoInc, 2005

New York-based corporation Refco was one of the famous companies in the financial sector. It provided a diversified portfolio of financial services and was operating in around 14 other countries. After it was established in 1969, it had eventually become the largest broker on the Chicago Mercantile Exchange and had more than $4 billion customer accounts. Ultimately the company accrued a total debt of $430 million, for which Philip Bennett, CEO and Chairman, pleaded guilty.

7. IndyMac Bancorp, 2008

IndyMac was once the most innovative of mortgage lenders that innovated and allowed borrowers to borrow without providing full documents about the assets or income. The concept became very popular but eventually the number of defaulters grew rapidly to ultimately leading the company to a final collapse. At the time of filing for bankruptcy, the total assets of the company stood at $ 32.7 billion and the debt stood somewhere between $200 and $500 billion.

8. Delta Airlines, 2005

Once upon a time Delta Airlines was among the best and most profitable airlines in America but the rising fuel prices and stiff competition from low cost airlines proved fatal to the airlines. This clubbed with the non-availability of concessions and higher labour costs led to the company filing for bankruptcy in 2005. But, this scene was soon swapped and in 2007 Delta Airlines again made a comeback.

9. Trump Entertainment Resort, 2004, 2009

Trump Entertainment Resort, the great gambling resort, got its first blow of going bankrupt in the year 2004, but it managed to somehow revive back within just one year. Later, when the economic slump hit the economy of USA, and gambling once again got a big jolt, the company was in tatters. When it filed for bankruptcy in 2009, its debts stood at around $1.74 billion.

10. Delphi, 2005

Delphi is believed to have been created as a spin off to GM. It was one of the largest auto parts manufacturers in USA, but eventually it was discovered to have been a ploy deliberately set up so that a large number of layoffs could be carried out without anyone suspecting the role of GM.

We can learn many lessons from this information:

Having a glorified history does not mean a thing when you are bust.

The companies have overplayed their capacity and fallen into a mess as a result. 

The value of total assets pledged for borrowing by far were inadequate to cover the facilities granted.

Some of the conglomerates have used several ploys with high-sounding policy commitments of their past activities to qualify for government bailouts.

While in business all of them have been occupying ivory tower status.

It is pathetic to note that in the statement by the SMs of MTD Walkers, they have gone down to the extent of publicising some awards they have won. For the reading public of this country such awards may not inflame any provocation because they have seen the finance ministers who were awarded the best Asian ranking coming into the dock pleading innocence to many allegations levelled against them costing the country’scoffers heavily before even the ink in the award print dried! 

They have explained at length the shifts they have been taking to expand their operations to other specialised fields. They have resorted to this as a remedy to ensure their survival as well as to entice the bankers as they admit who were made to look at them with a view to help sustain the operations ofa 165-year-old company. The same lateral thinking brilliant minds have gone to courts to safeguard their funds against possible unscrupulous operations by the company they strived to sustain one time. 

Jehan Amaratunga 

The statement of the SMs appears to be a confession of their faults rather than a plausible explanation of any unavoidable circumstances they were faced with in their operations. 

To make a long story short, it has to be explained why the name of Jehan Amaratunga has been cited. He is the Executive Deputy Chairman of this Group and has served as the Country Head of MTD Walkersin 2010. He became a Director of People’s Bank in 2010 while holding these positions in the MTD Group.Today People’s Bank is among the eight banks applying to courts to prevent this company from selling or transferring its shares. It needs no further explanation to justify the suspicions that arise about his role as a director in lending huge sums extending upto 10 billion to this company while also serving as a member of the Audit Committee, Risk Management Committee and Investment Committee as a Director of the Bank.

Another very interesting episode is the reference in the statement to the effect that “as commonly seen throughout South Asian countries, whenever there is a major change in political leadership, there is an immediate downturn in economic activities;Sri Lanka was no stranger to that norm…” Whatever its veracity, Jehan Amaratunga has been exceptionally lucky to continue his directorate of People’s Bank both before and after this political leadership change. From about 2010 to 2018. This may be the reason for the obiter dictum of his SMs’ report quoted above.

Finally it would suffice to say “the proof of the pudding is in the eating.”

No amount of cookery explanation would be of any use. What the Group of Companies faces today is the best demonstration for all the explanations provided by the Senior Managers.

(The writer is a former Chairman Bank of Ceylon, past President of the Ceylon Bank Employees Union, and a Councillor of the CMC.)