KARACHI: Pakistan International Airlines (PIA) is set to issue a 10-year sukuk, worth up to Rs20 billion this month to meet its working capital requirements, an investment banker engaged in the deal told The News.
The national carrier has mandated National Bank of Pakistan, BankIslami Pakistan Limited and BIPL Securities, to act as joint book runners for the issue. BankIslami is also acting as advisor and investment agent for the sukuk issuance.
The issue will be privately placed and backed by government guarantee, and will also be classified as ‘public sector sukuk’. The ministry of finance has given statutory liquidity requirement (SLR) eligible status to sukuk.
The registration of the sukuk will start on July 9, 2021 and the book building process will start from July 13, 2021 and continue till July 14, 2021.
The sukuk will be allotted on July 16, 2021 and will be subsequently listed on the Pakistan stock exchange by August. The proceeds from the sukuk would be used for general working capital requirements and for settlement of part of existing financing facilities.
The state-owned PIA is issuing an Islamic instrument to secure longer-term finance that is expected to be utilised to obtain new aircrafts under a business plan to improve the performance and operations of the loss-making national flag carrier.
The Economic Coordination Committee in April approved a restructuring plan worth Rs457 billion for the PIA to control its losses in the next three years. The restructuring plan, whether operational or financial, is being undertaken with the consent of the government.
PIA posted a net loss of Rs34.6 billion in the year ended December 31, 2020, compared with a loss of Rs52.6 billion in the previous year, according to the company’s annual report for 2020.
The appetite for the sukuk offerings is gaining momentum. The demand for such debt instruments is expected to grow further as the economy shows signs of strong recovery.
The year 2020 was a significant year for Islamic banking industry from the capital markets perspective with issuance of Rs761 billion domestic Islamic bonds or sukuk.