Pakistan’s Privatisation Commission has introduced stringent net worth requirements of Rs30 billion for potential purchasers aiming to acquire a majority stake in the national flag carrier, Pakistan International Airlines (PIA).
Led by Privatisation Minister Abdul Aleem Khan, the commission’s board has approved prequalification criteria for bidders and formed a dedicated committee for overseeing the transaction process. The government has initiated the bidding process, inviting offers to purchase 51 to 100 percent stakes in PIA by June, with a deadline of May 3 set for investor submissions of statements of qualifications.
Interested bidders are mandated to meet the Rs30 billion net worth threshold, with consortiums required to demonstrate a combined net worth of Rs30 billion. Additionally, non-airline entities participating in bidding consortia must exhibit an annual revenue of at least Rs200 billion.
Foreign-owned airlines are barred from acquiring majority stakes, necessitating partnerships with local investors. In anticipation of privatisation, the government has presented a segregation scheme and Scheme of Arrangement to address legacy loans afflicting PIA. The cabinet has approved the establishment of a new entity, the PIA Holding Company, which will function as the parent organization of the existing Pakistan International Airlines Company (PIACL).
The government aims to address PIA’s legacy loans through the segregation scheme by transferring negative equity and liabilities to the new holding company. PIACL will become a wholly-owned subsidiary of the PIA Holding Company, slated for listing on the stock exchange, with employee and pensioner liabilities being transferred accordingly. The reconstituted PIA transaction committee will oversee the sale process, with Abdul Haseeb Khan appointed as legal adviser and Kamran Farooq Ansari as Director-General of the Privatisation Commission.
Details outlined in the Scheme of Arrangement indicate that total assets amounted to Rs171 billion as of September 2023. Following bifurcation, assets will be allocated as Rs147 billion for the Core Undertaking and Rs25 billion for the Non-Core Undertaking.
As of September 2023, PIA’s total liabilities stand at Rs831 billion, with Rs629 billion allocated to the non-core segment (holding company) and Rs202 billion to the core undertaking. Currently, PIA’s net equity is negative Rs659 billion, with the post-arrangement net equity of the core undertaking projected to be negative Rs56 billion, while the remaining negative Rs604 billion will be transferred to Holdco.
The PIA recently announced plans for a scheme of arrangement to bifurcate its operations, with the aim of restructuring and reorganising the company, according to a notice issued to the Pakistan Stock Exchange (PSX) on Monday.
