Hascol proposes settlement of Rs 54.5 billion default
KARACHI: Hascol and its sponsors Vitol Dubai offered to settle the Rs 54.5 billion loan over 12 years, which Hascol secured from 19 local banks and then defaulted.
Hascol, for a time, guaranteed this loan on the basis of a hypothetical guarantee, that is, Hascol’s current fuel stocks, which were to remain in the possession of the petroleum marketing company. It happened after the default that the company had no tangible assets that could be seized and realized.
The National Bank of Pakistan (NBP) received from Hascol the proposed financial model and the draft terms sheet, which were shared with other banks.
NBP is likely to become the lead bank with Habib Bank Limited (HBL) to drive and manage the company’s 12-year repayment plan.
Hascol had defaulted on loan repayments and banks classified most of their exposures and created provisions of Rs39.4 billion, according to the central bank.
At the end of June 2021, the National Bank of Pakistan had the highest exposure of Rs 18.83 billion, while Habib Bank Limited had the second largest exposure of Rs 5.44 billion.
According to Hascol’s proposal, out of the total residual debt of Rs.54.5 billion, Rs.9 billion provided by HBL and Askari Bank would be marked as an active working capital facility.
Debt of 45.5 billion rupees will be reduced by 15%, or 6.8 billion rupees, through a debt-for-equity swap that will be offered to all other participants in the debt on a pro rata basis. .
The unsubscribed portions will be offered to other lenders or will remain part of the residual debt.
Shares worth Rs 8 billion will be issued by Hascol to inject new shares into the company. This rights issue will be subscribed by the Vitol sponsors.
The proceeds of this Rs 8 billion will be used to reduce the remaining debt of participating term lenders who would agree to reinstate their working capital limits to the extent of their adjusted amount.
It is proposed to repay the remaining 30.7 billion rupees in an amount over 10 years with a grace period of one year. The increase in the residual debt will be cumulative and payable in the 11th and 12th years.
Sources said it was Hascol’s first time to come to the settlement table with a proposal.
“The proposed arrangement has yet to be approved by the banks as they are not united in moving forward with the settlement,” the sources said, adding that the banks were assessing whether to accept the settlement. or pursue Hascol.
To complicate matters, the Federal Investigation Agency (FIA) Karachi drew up an FIR against some 20 NBP officials for issuing loans on hypothetical guarantees.
The sources said the FIR draft is being forwarded to the FIA ââGeneral Manager in Islamabad for approval.
The 20 NBP officials were all junior staff and none of the senior / senior officers on duty are named in the FIR draft, the sources said.
The president of the bank and other officers form the credit committee which approves loans.
“The settlement agreement appears far-fetched as there was no unity among the banks, mainly due to the incompetence of senior management at the main bank.”
Until 2018, Hascol’s financial condition looked pretty good, but its assets grew from Rs 73.9 billion in December 2018 to Rs 59.7 billion in September of last year.
Sales also fell to 99.4 billion rupees in September 2020 from 275.6 billion rupees in December 2018. In the nine-month period of 2020, the company suffered a loss of 20.9 billion rupees. and is crippled by severe debt.
Vitol Dubai is the company’s largest shareholder with 40 percent stake. Since December 2019, Alan Duncan, a British politician, has been the Chairman of the Board of Directors of Hascol Petroleum Limited.