Islamabad, 30 August 2024 (TDI): Just two of the six chosen parties seem serious about purchasing Pakistan International Airlines (PIA), the government revealed on Thursday.
It’s possible that the entity won’t fetch as much as it did during its previous eight-year attempt at privatization.
Despite the extended deadline of October 1st, the secretary of the Privatization Commission disclosed fresh information in a briefing to the Senate Standing Committee on Privatization: the selected parties have asked for further time to complete their financial models and conduct due diligence.
During the PIA due diligence process, “two parties were seriously active” out of the six shortlisted parties, according to Usman Bajwa, Secretary of the Privatization Commission.
Parliamentary Secretary of the Pakistan Muslim League-Nawaz (PML-N), Talal Chaudhry, presided over the committee meeting.
Bajwa, who is in charge of the transaction process directly, stated, “We think that two or three parties are digging into the specifics and heading towards the financial bid stage. Additionally, we think that more parties may join these coalitions.”
The secretary also told the committee that the parties have suggested that international arbitration be used in the event of an investment dispute and that they have expressed concerns about Pakistani law’s applicability in this situation.
The airline has lost Rs 500 billion over the last eight years. The government has nominated Fly Jinnah, Air Blue, Arif Habib Corporation, Blue World City, Pak Ethanol (Pvt) Consortium, and YB Holdings Consortium for the airline’s privatization.
The identities of the two significant parties were kept a secret by the secretary.
The deadline for the government to privatize the airline was originally set for June or July, but it was later extended to October 1. Bidders wanted more time to complete their financial models, but the prime minister declined to give another one, Bajwa said.
Chaudhry asked if the administration will be able to complete the privatization deal by the new deadline.
In response to a query, the secretary stated that PIA would have cost much more now if the government had privatized it in 2015.
Despite having cleared PIA’s financial sheet of Rs623 billion in liabilities, this statement suggests that the government has modest expectations of obtaining a favorable price.
Also read: Government Insisting To Protect PIA Jobs After Privatization
A holding firm now liable to taxpayers received Rs623 billions of PIA’s total liabilities of Rs843 billion.
There has been Rs 500 billion loss since the PML-N administration stopped the PIA privatization process in 2015.
The government’s plan to privatize, which mostly involves electricity distribution businesses, depends on the PIA privatization being successful. This was emphasized by the secretary.
Reportedly, the landing rights and foreign routes of PIA have not been fully valued by the financial advisor, which may have an effect on the bid price.
According to Bajwa, the bidder who requested the most recent statements was given access to PIA’s audited financial reports through April 2024.
The government, he continued, is working to finalize the conditions of the privatization by mid-September and to finish buyer-side due diligence by the end of March.
Investors have also expressed concerns about the proposed terms of the privatization, according to the secretary of privatization. He said the government was offering to sell anything from 51 percent to 100 percent of the shares.
According to him, the majority of parties are interested in purchasing 75% or more of the shares. Two parties are interested in 51% of the shares, one in 75%, and another in 80% to 90%. One party has shown a readiness to purchase 100% of the shares.
The government intends to settle on a single percentage for the sale, the secretary stated, based on input from the selected companies.
According to the secretary, the interested parties are likewise hesitant to invest the $500 million that PIA estimated as part of the business plan.
In order to keep the airline running, Bajwa stated that the buyer would need to pay off an additional Rs220 billion in debt in addition to providing an initial investment of Rs80 billion. The acquirer will also need to contribute an additional $500 million to these investments.
Also read: PIA Loses Rs 21.81 Bln Due To Aircraft Delayed
The secretary of privatization said that at least two parties have indicated a desire for international arbitration and law when asked about the applicable legislation in the event of a disagreement, but the government will make an effort to guarantee that the agreements are controlled by Pakistani laws.
Pakistan has previously suffered consequences amounting to up to $6 billion as a result of its unfavorable encounters with international arbitration.
Foreign investors are wary of putting their trust in Pakistan’s legal system, though. Notably, PIA has not attracted the interest of any international investor.
