Companies with net worth of Rs30 billion only eligible to bid for PIA stakes
The Privatization Commission of Pakistan has set a net worth
requirement of Rs30 billion for potential buyers aiming to acquire a majority
stake in Pakistan International Airlines (PIA), the national flag carrier.
Chaired by Privatization Minister Abdul Aleem Khan, the
commission's board has approved prequalification criteria for bidders and
established a transaction committee to oversee the sale process. The government
has invited bids to sell 51 to 100 percent stakes in PIA by June, with a
deadline for investor submissions set for May 3. Bidders must meet the Rs30
billion net worth threshold, while consortiums must demonstrate a combined net
worth of Rs30 billion. Non-airline entities in bidding consortia must exhibit
an annual revenue of at least Rs200 billion.
World
Bank consults with Pakistani government on PIA privatization strategy
Foreign-owned airlines are barred from acquiring majority stakes,
necessitating partnerships with local investors. In preparation for
privatization, the government has proposed a segregation scheme and Scheme of
Arrangement to address legacy loans affecting PIA. The cabinet has approved the
formation of a new entity, the PIA Holding Company, which will act as the
parent organization of the existing Pakistan International Airlines Company
(PIACL).
The government intends to alleviate PIA's legacy loans through the
segregation scheme, transferring negative equity and liabilities to the new
holding company. PIACL will become a wholly-owned subsidiary of the PIA Holding
Company, listed on the stock exchange, with employee and pensioner liabilities
transferred accordingly. The reconstituted PIA transaction committee, headed by
Abdul Haseeb Khan with legal advisement from Kamran Farooq Ansari, will oversee
the sale process.
Details of the Scheme of Arrangement reveal that total assets
before bifurcation amounted to Rs171 billion as of September 2023. Post-split,
assets for the Core Undertaking and Non-Core Undertaking would be Rs147 billion
and Rs25 billion, respectively.
Government
fast-tracks PIA privatization amid financial crisis
As of September 2023, PIA's total liabilities stand at Rs831
billion, with Rs629 billion allocated to the non-core segment (holding company)
and Rs202 billion to the core undertaking. Currently, PIA's net equity is
negative Rs659 billion, with post-arrangement net equity projected to be
negative Rs56 billion for the core undertaking and negative Rs604 billion for
Holdco.
In a separate development, PIAA announced plans for a scheme of
arrangement to bifurcate its operations, aiming to restructure and reorganize
the company. An Extraordinary General Meeting (EOGM) of PIAA is scheduled for
April 20, 2024, in Karachi, where members will vote on corporate restructuring,
including the separation of the business into Core Undertaking (PIA) and
Non-Core Undertaking (Holdco).
PML-N
leader advocates replacing PIA with private sector-operated airline
This initiative follows a January 11, 2024, update regarding the
divestment of a 51 percent stake in PIAA, approved by the Privatisation
Commission. The Scheme of Arrangement was shared with the board of directors on
March 25, 2024, receiving approval on March 28. Under the scheme, the non-core
undertaking will be transformed into PIA Holdco, while PIA will retain its
aviation business. Existing shareholders' equity holding in PIAA will be
replaced with fresh shares issued in Holdco, maintaining the same percentage.
The scheme aims to ensure financial stability for PIA, requiring significant
capital expenditure over the next five years, and facilitate the privatization
process to attract a strategic partner. Upon approval by the company, the
scheme will be subject to sanction by the Securities and Exchange Commission of
Pakistan.
Source: The News