Coastal Resort Funding Sought as Lanka Orix Taps Tourism Rebound After War

Lanka Orix Leasing Co. (LOLC), backed by Japan’s Orix (8591) Corp., is seeking 4 billion rupees ($35 million) to refurbish a coastal resort complex that will become Sri Lanka’s biggest, said Chief Executive Officer Kapila Jayawardena.

The 350-room resort that comprises three of Lanka Orix’s hotels on the island’s southern coast will open by mid-2013, said Jayawardena. The Colombo-based company is seeking “long- term project” funding from both domestic and foreign banks, and is in the process of finalizing a 10-year agreement with “one of the largest hotel operators in the world” to run the complex, he said, declining to elaborate.

Sri Lanka’s $50 billion economy has rebounded, as peace prompts companies including Shangri-La Asia Ltd. and Sheraton Group to build resorts. Arrivals in the South Asian island, one of Conde Nast Traveler’s top five destinations to watch in year 2012, rose 31 percent to a record 855,975 last year. Thailand estimates tourist arrivals to have reached as many as 19 million in 2011.

“We see huge potential in leisure, similar to Thailand,” Jayawardena said in an interview yesterday. “There is now a different economic landscape in Sri Lanka after peace.”

The end of the island’s 26-year civil war in May 2009 has also boosted infrastructure development, consumer demand and agriculture businesses, leading to an economic growth of 8.3 percent estimated for 2011 and 8 percent forecast for 2012, according to the Central Bank of Sri Lanka.

Record Profit

The LOLC group, as the company is locally known, is poised to report record profit in the year ending March 2012, as its core financial services units grow with the economy’s resurgence, Jayawardena said. LOLC, whose businesses include leasing, insurance, micro-credit, agriculture, trading and construction, posted an unprecedented net income of 7.02 billion rupees in the previous financial year.

Orix, a Japanese financial services provider based in Tokyo, is the Sri Lankan firm’s single-largest investor with a 30 percent stake, according to Jayawardena.

Jayawardena said the island’s north and east, which were once the main battle grounds in the war, would contribute to 20 percent of business volumes in the next 24 months, up from 4 percent before peace. LOLC also plans to increase its island- wide network of offices to 200 from 160 in the next 18 months, he added.

“At the moment we feel we have a very comprehensive set of investments in line with economic growth,” he said.

LOLC fell 1 percent to 77 rupees at 10:07 a.m. in Colombo. The shares are down 6.3 percent so far this year, compared with a 3.3 percent drop in the benchmark Colombo All-Share Index.

Hong Kong-based Shangri-La plans to invest $500 million to build a hotel in the island’s capital and $130 million in a second resort in Sri Lanka, Chief Financial Officer Madhu Rao said July 4. The Sheraton Group will invest $300 million in a leisure project in Sri Lanka, the nation’s information department said Dec. 1.

To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net

To contact the editor responsible for this story: Hari Govind at hgovind@bloomberg.net

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