Finance Ministry is likely to extend a Government of Pakistan (GoP) guarantee for the PIA to arrange additional Rs 5 billion loans from commercial banks to meet critical financial requirements, well informed sources told Business Recorder. The sources said a meeting of the Cabinet Committee on Restructuring (CCoR) was held on February 18, 2011.
PIA highlighted the problems being faced in obtaining additional financing from the banks in the absence of renewal/ rollover of Government of Pakistan guarantees for previous financing arrangements. Further, keeping in view the critical requirement of funds by the Corporation to meet its operational obligations, they requested assistance in obtaining loans of Rs 5 billion from commercial banks against fresh GoP guarantees.
The loans of Habib Bank, KASB Bank, Askari Bank and NBP were rolled over for one year during 2009-10. GoP guarantees in respect of these loans were issued for the initial terms but were not extended to cover the rollover period due to non-completion of codal formalities which included ECC approval to issue the guarantees.
According to sources, ministry of finance also approved terms and conditions of the following PIA loans: (i) Faysal Bank Rs 2 billion with price of 6 MK+175 bps for a period of 5 years and 2 years grace period. This is in replacement of the $ 15 million loan for which a guarantee was issued. However, no GoP guarantee for rupee loan was issued; and (ii) HBL extended Rs 2 billion with 3 MK+90 bps for a period of one year. Ministry of finance issued a letter of comfort for one year only. No GoP guarantee was issued.
Ministry of defence has proposed that continuing guarantees in respect of all the loans may be issued by the MoF and rollover of these loans be approved on yearly basis or for the term of the loan. The revised term and conditions of the following three loans as demanded by banks were recommended for approval: NBP- Rs 1.5 billion- existing price- 3 MK+90 days-revised price- 3 MK+ 150 bps-rollover on yearly basis; HBL- Rs 1 billion-existing price- 3 MK+90bps-revised price-3MK+150 bps-rollover on year basis; and HBL- 2 billion-existing price 3 MK+90 bps-revised price- 3 MK+200 bps (effective April 2010)- four year term loans with the equal monthly repayments.