The newly formed holding company responsible for the privatization of Pakistan International Airlines (PIA) has approved the restructuring of the airline’s Rs. 268 billion commercial debt.
The holding company on Wednesday endorsed the restructuring term sheet. Tariq Bajwa, former Special Assistant to the Prime Minister, chaired the meeting, which convened urgently with directors attending virtually.
Banks have consented to extend the debt tenure to ten years and slash interest rates to a maximum of 12 percent. Should the government fail to privatize PIA within three years, banks retain the right to renegotiate terms, potentially reverting to prevailing interest rates in 2027.
The government plans to file a scheme of arrangement with the Securities and Exchange Commission of Pakistan (SECP) to be done with privatization by June 11th.
Bidding will start next week. Subsequently, PIA will split into two entities, with the holding company assuming the airline’s bad debts amounting to over Rs. 650 billion.
Annual interest payments of Rs. 32 billion to banks will be shouldered by the government, with debt settlement reliant on privatization proceeds or budget allocations.
The holding company cannot work on new loans for the flag carrier, with commercial banks holding priority rights over its assets. Through restructuring, the Rs. 268 billion debt will be the federal government’s responsibility. Banks will essentially get over Rs. 300 billion in interest payments over a decade. Total payouts to banks may reach Rs. 573 billion during this period.
Banks will also enjoy sovereign guarantees and exclusive rights to the holding company’s assets, with lenders retaining the option to demand borrowing rates of that time if privatization fails within three years.
Moreover, lenders retain the authority to reject future borrowing by the holding company.
Rescheduled debts include HBL’s nearly Rs. 31 billion, NBP’s Rs. 48 billion, Bank of Punjab’s Rs. 59 billion, Askari Bank’s Rs. 34.5 billion, Faysal Bank’s Rs. 22.5 billion, JS Bank’s Rs. 22 billion, and Al Baraka Bank’s Rs. 7 billion.
what does this means
Someone (Private company) will operate PIA, Banks will own PIA and Govt will pay off its debt in 10 years