BPPL to re-organise loan, capital structure

Byco Petroleum Pakistan Limited (BPPL) intends to re-organise its loan and capital structure. Byco Oil Pakistan Limited (BOPL), which is an unlisted public company incorporated in Pakistan and is a 100 percent wholly owned subsidiary of Byco Industries Inc (BII).
Byco Petroleum Pakistan Limited becomes the major shareholder of BPPL instead of BII, which is a company incorporated under the laws of Mauritius and which currently owns approximately 67.52 percent shares of BPPL, and various inter-company loans given to BPPL are novated to BOPL and converted into equity of BPPL.
According to a notice sent to Karachi Stock Exchange (KSE), this process is being achieved through the following steps:
a. Various associated company loans (local and foreign currency) available by BPPL are novated such that BOPL, replaces BPPL as the borrower.
b. In consideration for the novation of loans, BOPL (as the lender) and BPPL (as the borrower) will, on a back to back basis, enter into a corresponding rupee loan agreement in terms of which BPPL will owe BOPL such rupee equivalent amounts which prior to the novation of loans were owed by BPPL to its inter-company tenders.
c. The payment obligations under the BOPL-BPPL loan agreement, and another rupee loan agreement of a similar nature already entered into by BOPL and BPPL, will be satisfied by BPPL through concerting the loan (including accrued mark up thereon) into equity by issuing 585,754,341 new shares without rights offering to BOPL.
The novation of the aforesaid associated company loans and the issue of ordinary shares at par value of Rs 10.00 by BPPL without a rights issue pursuant to the first proviso to sub-section 1 of Section 86 of the Companies Ordinance, 1984, have been approved by BPPL's Board of Directors and shareholders at their meeting on December 7 and December 31, 2010, respectively.
The proposed conversion of BOPL-BPPL loan into equity will significantly reduce the financial obligation of BPPL, which in turn will not only improve liquidity position of the company, but will also ease lender pressure. This conversion of loans into equity also demonstrates exceptional commitment of the sponsor towards the company. Upon completion of steps A-C, listed above, BOPL will hold 850,510,099 shares of BPPL translating into 87 percent shareholding of BPPL.
BPPL has already sought consent of its board of directors, shareholders, State Bank of Pakistan, Competition Commission of Pakistan and Securities and Exchange Commission of Pakistan for the proposed novation and conversion of loans into equity.