Hascol offers settlement of Rs54.5 billion loan default

KARACHI: Hascol and its sponsors Vitol Dubai have proposed to settle the Rs54.5 billion loan over a period of 12 years, which Hascol obtained from 19 local banks and then defaulted on.

Hascol, over a period of time, secured this loan on the basis of hypothetical collateral, i.e., Hascol’s running fuel inventories, which were to remain in the possession of the oil marketing company. It occurred after the default that the company did not have any tangible assets, which could be attached and realised.

The National Bank of Pakistan (NBP) received the proposed financial model and draft term sheet from Hascol, which has been shared with other banks.

The NBP is likely to become the lead bank along with Habib Bank Limited (HBL) to steer and manage the 12-year repayment plan of the company.

Hascol had defaulted in the repayment of loans and banks classified most of their exposure and created provisions of Rs39.4 billion, according to the central bank.

As of end of June 2021, the National Bank of Pakistan had the highest exposure of Rs18.83 billion, while the Habib Bank Limited had the second largest exposure of Rs5.44 billion.

According to Hascol’s proposal, of the total residual debt of Rs54.5 billion, Rs9 billion provided by the HBL and Askari Bank would be marked as active working capital facility.

The debt of Rs45.5 billion will be reduced by 15 per cent, i.e., Rs6.8 billion through a debt-equity swap to be offered to all the remaining debt participants in proportion to their share.

Unsubscribed portions will be offered to other lenders or will remain part of the residual debt.

Right shares worth Rs8 billion will be issued by Hascol to inject fresh equity into the company. This right issue will be underwritten by the sponsors Vitol.

Proceeds of this Rs8 billion will be used to reduce the remaining debt of those participating term lenders who would agree to reinstate their working capital limits to the extent of their adjusted amount.

The remaining Rs30.7 billion is proposed to be repaid in a staggered amount in 10 years with a one-year grace period. Mark-up on the residual debt will be accrued and payable in the 11th and 12th year.

Sources said this was the first time that Hascol has come to the settlement table with a proposal.

“The proposed arrangement has not been approved yet by the banks, because they are not united in going ahead with the settlement,” the sources said, adding that the banks were evaluating whether to go with the settlement or prosecution of Hascol.

To make matters more complicated, the Federal Investigating Agency (FIA) Karachi has drafted an FIR against some 20 officials of the NBP for issuing the loans on hypothetical collateral.

The sources said the draft FIR is forwarded to the director general FIA in Islamabad for approval.

The 20 NBP officials were all subordinate staff and none of the serving senior/top officers are nominated in the draft FIR, the sources said.

The president of the bank and other executive officers constitute the credit committee that approves the loans.

“The settlement deal seems farfetched since there was no unity among the banks primarily because of the incompetency of the lead bank’s top management.”

Till 2018, the Hascol’s financial conditions were looking pretty good but its assets dropped from Rs73.9 billion in December 2018 to Rs59.7 billion by September last year.

The sales also dropped to Rs99.4 billion in September 2020 against Rs275.6 billion in December 2018. During the nine-month period of 2020, the company made a loss of Rs20.9 billion and is crippled by severe debt.

Vitol Dubai is the major shareholder of the company having 40 per cent share. Since December 2019, Alan Duncan, a British politician, is the chairman of the board of Hascol Petroleum Limited.