SIFC agreed to divide PIA into two separate firms before elections

Special Investment Facilitation Council (SIFC) has agreed to divide Pakistan International Airlines (PIA) into two separate companies. SIFC has accepted the PIA division without first getting an opinion from a financial consultant.

The cabinet is going to accept the deal model for selling the main business of PIA next week. However, the SIFC has agreed to divide PIA under the supervision of the caretaker government.

Bi-furcation approved without ascertaining valuation by financial consultant

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According to this model, commercial banks have agreed to re-profiling Rs 268 billion of PIA debt into conventional and Islamic securities at a rate of 12% with a 10-year majority period at an adjustable rate. However, they will pay the remaining debt with earnings from the PIA’s privatization and budgetary allocations.

However, the timing of this decision is very sensitive as the decision of national airlines came just some days before the general elections of 2024.

The caretaker government will deposit the unpaid debts of PIA worth Rs 830 billion in the new holding company. However, some sources claim that Caretaker Minister Shamshad Akhtar raised major concerns about the lack of assessment of financial experts regarding PIA valuation. Although the banks have agreed to re-profile PIA debt, they have not signed off in writing.

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Moreover, the Privatization Commission had to submit a thorough summary for the upcoming cabinet meeting on Tuesday or Wednesday.

Caretaker Minister for Privatization, Fawad Hasan Fawad, responded that the SIFC had approved the division of PIA into two separate organizations.

Furthermore, Fawad said SIFC has authorized the valuation process of PIA. It is consistent with the best worldwide standards and norms.

According to Fawad, it is not a real estate asset in the same sense as transactions like the PIA. This approach is used to finalize a band that is not disclosed at the beginning of the process. They presented this formula to the SIFC, which they approved.