Last Thursday the Commercial High Court issued an Interim Order to HNB and its key shareholders preventing them from holding an EGM, which was scheduled for next week, until a court decision was made on the bank proceeding with a share issuance of $ 50 million to the Asian Development Bank (ADB).
The interim order was given when the petitioner Stassen Exports appeared before Colombo Commercial High Court Judge Shiran Gunaratne. The Interim Order, pending the final determination of the application by the respondents, prevents the EGM of HNB scheduled for 26 Wednesday 2016 or any time thereafter for the purpose of obtaining the approval of shareholders to issue shares to the Asian Development Bank (ADB) by way of a private placement, in consideration of the proposal made by ADB to make an equity investment in HNB, in any manner whatsoever, according to the determination.
The HNB board in September approved the issuance of shares for $ 50 million to the ADB by way of a private placement, making the development lender a strategic investor.
“The proceeds of the issue of shares by private placement as aforementioned will be utilised for the purpose of strengthening the capital base/balance sheet of the bank and supporting the overall business growth of the bank,” the bank said in a stock exchange filing at the time.
The private placement of up to 9.9% of the shareholding is subject to shareholder and regulatory approval. The shares will be offered at the average price at which the shares were traded during the 30-market-day period preceding the date of the EGM at Rs. 220 if the average price is more than Rs. 220, and Rs. 190 if the average price is less than Rs. 190.
In March HNB entered into an agreement with ADB to raise $ 100 million by way of a seven-year senior debt, HNB said in a press release. It was earmarked as the largest transaction of ADB with a local bank and the funds raised were to have been deployed towards infrastructure development projects, with special emphasis on renewable energy, power and irrigation.