The Special Investment Facilitation Council (SIFC) has sanctioned Pakistan International Airlines (PIA) bifurcation into two distinct units.
The SIFC decision transfers PIA’s hefty Rs830 billion debt to a new holding company, preceding a comprehensive financial evaluation. The interim federal cabinet is set to approve the divestiture framework for PIA’s core functions soon. Banks have agreed to restructure Rs268 billion of PIA’s debt into mixed financial models, capping interest at 12% over ten years, albeit variably, funded by privatization revenues and fiscal allocations.
Dr. Shamshad Akhtar, the Finance Minister, highlighted the missing valuation in the debt restructuring process, with banks’ formal approval still pending. A detailed plan is to be discussed in a cabinet meeting next week.
Fawad Hasan Fawad, the Minister for Privatisation, confirmed SIFC’s approval to split PIA, adhering to financial advisors’ suggestions and a valuation method up to international norms. This method prioritizes a weighted average for valuing PIA, keeping initial estimates confidential.
The cabinet’s impending nod will cover the split strategy, valuation methods, deal structure, future business plan, investment expectations, and debt management tactics.
Fawad mentioned the plan to shift PIA’s debts to a holding firm rather than the state, with asset sales tackling these dues. Notably, overseas assets like the Roosevelt Hotel and Hotel Scribe will move to the holding company, not sold, emphasizing their enhancement.
The Privatisation Commission is courting investors, with financial consultants spearheading marketing and information sharing.
After valuation, the cabinet will contemplate selling about 55% of PIA’s shares, retaining a stake to capitalize on future enhancements, acknowledging the airline’s negative equity and the complexity of this financial rescue.
Additionally, the SIFC approved the Federal Board of Revenue’s (FBR) reform plan, pending implementation by the post-election government as per the Election Commission of Pakistan’s guidance.
