By: Mohsin Siddiqui (Chief Reporter)
In response to Pakistan’s call for proposals to facilitate the privatization and restructuring of the Pakistan International Airlines (PIA), eight companies, three of which rank among the top 20 financial advisory firms, have stepped forward.
Minister for Privatization Fawad Hasan Fawad reported that the Privatization Commission received technical and financial proposals from these eight firms by the specified deadline, marking a significant stride in the country’s efforts toward privatization.
Initially, concerns loomed over the level of interest from financial advisors due to Pakistan’s history of initiating but later abandoning such transactions, especially concerning PIA. However, the response from these companies indicates a boost in the government’s privatization initiatives.
The firms were approached directly, with requests for proposals sent to the top 25 financial advisory companies using a Table of League mechanism. Out of the three respondents, Rothschild & Co, Houlihan Lokey, and Ernst and Young stand among the top 20 firms in terms of transaction value handled.
Despite the absence of proposals from the top 10 firms, the responses have been promising, with the involvement of well-established names such as Alvarez and Marsal, Ernst & Young, Tiagra Advisory and Investment Services, Investor Advisory Services (IAS), Cruise Aerospace Advisory Services HLV, Ijaz Tabasum Advisory Services, and Ceabury Securities.
To expedite the process, the government bypassed the typical international competitive bidding process and directly invited proposals from top global firms, aiming to swiftly prepare the struggling PIA for sale within the next four months.
PIA, incurring substantial losses, necessitates urgent action, with estimates projecting staggering financial deficits. The government is contemplating the sale of at least 51% of PIA’s shares, alongside management control, preferably to a local investor. One Pakistani airline has expressed interest in acquiring PIA, initiating formal communication with the privatization commission.
The urgency of the situation has prompted discussions with banks for new loans backed by PIA’s assets, yet the process has encountered delays, partly due to the presence of the International Monetary Fund and banks’ reluctance amid ongoing debt restructuring efforts.
With the aim to appoint a financial advisor by mid-November and receive a preliminary report on the restructuring of PIA by January’s end, the government faces a tight timeline, particularly with general elections on the horizon, making a three-month privatization goal seem unlikely under the interim government.
The privatization process, from hiring a financial advisor to the final bidding stage, typically takes over a year, signaling a challenging timeline for the current government.
