Pakistan International Airlines (PIA) is all set to issue a 10-year sukuk, worth up to Rs20 billion this month to meet its working capital requirements, a local media outlet reported.
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 expected to act as an advisor and investment agent for the sukuk issuance.
The issue will be privately placed and backed by government guarantee on the basis of monetary obligations, and would be classified as ‘public sector sukuk’. It has also been given statutory liquidity requirement (SLR) eligible status by the Ministry of Finance.
The registration of the sukuk is expected to start on July 9, 2021 and the book building process will begin from July 13, 2021 and continue till July 14, 2021.
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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.
PIA is issuing an Islamic instrument in an attempt to secure long-term financials to buy new aircraft and to curb the losses incurred due to its outdated business model.
Pakistan International Airlines Corporation, like other airlines around the world, suffered greatly because of the pandemic as international travel was limited, and the regular flights were not taking place as they were in the pre-pandemic world.
This can be seen in the number of Revenue hours flown by the national carrier as mentioned in the Economic Survey of Pakistan released on 10th June 2021. According to the survey, the revenue hours flown decreased from 110,640 hours in CY19 to 58,519 hours in CY20, a decrease of 47.1 percent year-on-year.
The ‘revenue passengers’ for the airline were also decreased from 5,290,000 in 2019 to 2,541,000 in 2020, a decrease of more than half in 2020.