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Hascol nears loan restructuring – Business

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KARACHI: Hascol Petroleum Ltd said on Wednesday its board had approved a plan to rehabilitate the company through restructuring and debt settlement.

The oil marketing company has been in financial difficulty since 2018. Its revenues have plummeted, losses have risen and loans have soared, sending its share price plummeting from over Rs 300 four years ago to less than Rs 7 each now.

The oil marketing company told its shareholders that its board of directors had also approved the draft of a letter which will be sent to all creditors, banks and financial institutions conveying the rehabilitation plan prepared by the management. The letter will also contain the process the company intends to follow through a plan of arrangement to be presented to the High Court of Sindh.

The scheme will be subject to creditor and shareholder approval as well as court sanction, he added.

At the end of 2021, the company said it was close to concluding negotiations with its bankers to deal with its “heavy burden of accumulated debt”.

The restructuring effort is focused on replacing expensive short-term debt with affordable long-term debt as well as new equity.

Its net loss amounted to 7.57 billion rupees for the calendar year 2021 compared to a net loss of 23.54 billion rupees in 2020. The company also discovered last year “inaccurate entries in its accounts 2019” and then restated its results from 2018 to 2020.

Regulatory actions against the Khyber Pakhtunkhwa company for unauthorized storage and sale of petroleum products damaged its reputation last year. The company has also drawn unfavorable attention from investors after a series of abrupt resignations by auditors as well as members of its board and senior management emerged last year.

As part of its financial recovery plan, the company is trying to convince banks to “partially convert their outstanding debt into equity” in order to reduce its “onerous debt service obligations”.

In addition, management is looking for a “significant reduction” in its operating costs, a reconquest of its market share, the sale of non-strategic assets, a strengthening of working capital and the raising of additional equity to reduce the indebtedness.

The main shareholder of the company is Vitol Group, which increased its stake from 25 to 40% in 2020.

The company has not released its detailed financial accounts for 2021. Its short-term borrowings alone stood at 33 billion rupees in 2020, down 10.7% from the previous year. According to the notes attached to the 2020 financial statements, these short-term loans from different banks were at interest rates ranging from the one-month Karachi interbank offered rate (Kibor) plus 1.5pc up to Kibor plus 20pc .

In a separate statement released earlier this week, Hascol Petroleum Ltd said the company recorded a positive earnings before interest, tax, depreciation and amortization (EBITDA) of Rs 1.35 billion in 2021 compared to a negative EBITDA of Rs 11, Rs 7 billion a year ago – a feat which the oil trader attributed to credit support to Vitol amid “unavailability of bank capital lines”.

“The company’s board and management are very hopeful that over the coming months Hascol Petroleum Ltd will be on a solid footing for years to come,” he added.

Posted in Dawn, August 25, 2022