Pakistan International Airlines (PIA) will position a 10-year sukuk in July this year to meet its working capital requirements, reported a local media outlet.
The proceeds from the sukuk will be used for general working capital requirements and for settlement of part of existing financing facilities.
The national air carrier is issuing an Islamic instrument in a bid to secure long-term financials for the obtaining of new aircraft and to reduce the losses incurred due to its outdated business model.
The registration of the sukuk will commence on 9 July, while the book building process will begin on 13 July and will end the next day. It will be apportioned on 16 July and will be listed on the Pakistan Stock Exchange (PSX) by August.
The book building structure will essentially determine the difference in trading positions as per the Karachi Interbank Offered Rate (KIBOR), a reference rate based on interest rates at which banks lend unsecured funds to other banks in Karachi’s money market. In this regard, the PIA has authorized the National Bank of Pakistan (NBP), BankIslami Pakistan Limited, and BIPL Securities to act as joint bookrunners for the sukuk.
The sukuk will be privately placed and backed by the government on the basis of monetary obligations, and will be released as a ‘public sector sukuk’. The Ministry of Finance has also given the Shariah-compliant financial certificate a Statutory Liquidity Requirement (SLR) eligibility ranking.
Prior to the sukuk issuance, PIA had posted a net loss of Rs. 34.6 billion on 31 December 2020 as compared to Rs. 52.6 billion the previous year, as per PIA’s report for 2020.
The PIA Sukuk-I financial certificate will most likely add more green to the Islamic banking industry, and will improve its working capital after many years of mortifying losses.