Financial adviser to be hired to lease Roosevelt Hotel site out: Parliamentary panel told

The Privatisation Commission will hire services of a financial advisor to lease out Roosevelt Hotel site in Manhattan, New York, for setting up a joint venture project, a parliamentary panel was informed on Wednesday.

Minister for Privatisation Mohammed Miansoomro informed the committee that the hotel industry went into losses and the government would lease the site of the hotel to generate funds for restructuring of Pakistan International Airline (PIA), which was delisted by the Cabinet Committee on Privatisation (CCoP) on October 31, 2018.

The committee was informed that the Roosevelt Hotel's financial losses stood at $7 million however, after adjustment of taxes, it turned into a $3 million profit showed in audited account 2018.

An independent subsidiary, the Pakistan International Airline Investment Ltd (PIAIL), owns the hotel and has an independent board. The committee was further informed that no office of the PIAIL is in Pakistan, which is a violation of the PIACL (Conversion) Act 2016.

Under the government's company law, it should have an office in Pakistan, Muhammad Shuaib Khan company secretary PIACL told the committee. On October 3, 2013, the CCoP directed that restructuring followed by divestment of 26 percent government equity stakes to strategic partner with management control was replaced by divestment of government shareholding in the PIACL and/or any of its subsidiaries in accordance with the provisions of the PIAC (Conversion) Act 2016 in the privatisation programme for early implementation.

A financial advisor along with tax and legal experts will also be hired to formulate lease terms and conditions as part of a comprehensive transaction structure and undertake the complete transaction pursuant to the PC Ordinance 2000 and Rules and Regulations framed there under.

A taskforce of key stakeholders on Roosevelt Hotel under chairman Minister for Privatisation Mohammad Miansoomro is also reviewing the whole process. On 31 October 2018, the CCoP directed the Privatisation Division and the Aviation Division to make a detailed presentation on the possibility of construction of high-rise hotels on the land of Roosevelt Hotel on public-private partnership basis.

Thereupon, the PIA Investment Ltd holding enterprise of Roosevelt Hotel engaged the services of M/s Deloitte in its draft report dated July 18, 2019, after analysing multiple option recommended that the highest and best use of the Roosevelt Hotel property was to redevelop the site into a mixed use of primarily office tower over retail and condominium if necessary.

The managing director PIAIL and the chief financial officer (CFO) were directed to appear in the next meeting of the committee to apprise the members of the committee the status of the PIAIL.

Audited accounts of the PIA for (January-June 2019) reveal the accumulated financial losses of the airline reached Rs 37 billion including exchange losses of Rs 5.9 billion, while revenue was Rs 65.9 billion.

The management of the company said the finance cost increased as loan balance increased by Rs 28 billion and a significant increase in the KIBO USD loan balance by USD 80 million.

The committee was further told that the process of hiring services of a consultant would shortly be completed, who would give a comprehensive restructuring plan following a decision taken by Adviser to the Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh in a meeting held in February 2019.

The CCoP on October 31, 2018 delisted the Pakistan International Airlines (PIA) from privatisation list. The Board of Privatisation Commission meeting held on November 2, 2017 concluded that it would not be possible to privatise the airline in the presence of sub-section 4 of section 4 of PIA Conversion Act 2016, which required amendments.

Under section 4 of the PIAC Conversion Act 2016, certain actions are required to be taken, which include power to pass orders for the transfer of assets during the validity period of the Act.

Management control and 51 percent majority share shall vest with the federal government. At the Supreme Court's hearing on April 12, 2018, the Attorney General for Pakistan submitted that for the time being no steps were being taken for the privatisation of the PIA, however, if at any point of time such decision was taken, the court "shall" be taken into confidence. Syed Mustafa Mahmud, chaired the meeting of the National Assembly's Standing Committee on Privatisation.