Hascol Identifies Restructuring Model for Reviving Business As Outlook Remains Grim

Hascol Petroleum Ltd (HASCOL) held a corporate briefing session to discuss future plans and the outlook for the business.

According to a report by JS Global, the company’s management believes that the company will continue as a going concern on the back of continuous support from its supplier Vitol and the recently proposed restructuring plan. According to the management, a comprehensive restructuring model with a plan to raise equity and reduce debt exposure has been formulated.

Going forward, the proposed plan is to be shared with lenders and shall be implemented through a scheme of arrangement to be filed in the Sindh High court. To recall, auditors of the company have expressed an adverse opinion with the December 2021 accounts, since the restructuring plan is yet to be formally presented in front of creditors.

The company’s proposed restructuring plan has four main components:

1. Converting Rs. 20 billion into a long-term loan with a grace period and waiver for interest charges
2. Restoring Rs. 20 billion in working capital lines to support oil imports
3. Settlement of banking loans (~Rs. 15 billion) at NPV of the long-term loan with upfront payments
4. Timely repayment of the various finance lease arrangements

The proposed plan will require an injection of Rs. 17 billion.

As of December  2021, the company operates a network of 667 retail sites, 19 of which are owned and controlled by Hascol. The development of under-construction sites was impacted earlier because of the working capital shortage.

The management believes that the company’s earnings potential will improve in case of an upward revision in OMC margins by the government. Management apprised that the industry has been in discussions with GoP regarding the issue and expects an announcement on margins may be made by the government by mid-September 2022.

During CY21, the company witnessed a 44 percent YoY decline in Sales due to a shortage of working capital lines. Other revenue of the company decreased during CY21 due to a decline in owned tank lorries and NFR (Non-Fuel retail) revenue.