The Economic Coordination
Committee of the Cabinet considered the summary on "Return on Participation Term
Certificates" (PTCs) by the government. The summary, dated June 20, 1998, submitted
by the Ministry of Industries and Production, has been approved for rescheduling of
outstanding/defaulted debt of Pakistan Steel Mills on the following terms and conditions:
Maturity (door to door commencing June 1, 1996), Moratorium (5 years
with effect from July 1, 1998 or 7 years with effect from July 1, 1996), Rate (Average
STFB rate, last 3 auctions), Mode of Redemption (20 half-yearly installments), Due Dates
(January 1 and July 1), Start of Payment (July 1, 2003) and Last Payments (July 1, 2013).
The syndicate of banks, now led by Habib Bank Limited also including
National Bank of Pakistan, United Bank Limited, Muslim Commercial Bank and Allied Bank
Limited, have however expressed their reservation to further re-scheduling of PTCs and
have indicated their willingness to re-package outstanding debts in terms of bonds
guaranteed by the Government of Pakistan, on the same pattern as was done for Government
of Pakistan/PTC/RECP/Saindak Metals Limited.
Pakistan Steel has been able to convince the banks to capitalize
interest/mark-up at the rate of 14 per cent per annum or average of STFB/Treasury Bills,
whichever is less (instead of average STFB of last 3 auctions prior to January 1, 1998
which had an average yield of 16 per cent per annum). The banks have also agreed to charge
and capitalize interest/mark-up on annual basis instead of half-yearly basis during
moratorium period i.e. from 1st July 1998 to June 30, 2003.
After re-packaging of PTCs through issuance of Government of Pakistan
guaranteed bonds the face value of the bonds to be issued to the Consortium of banks will
be Rs 14,035,684,673 as per the following bank-wise break-up:
Habib Bank Limited (Rs 3,508,921,464), National Bank of Pakistan (Rs
3,508,921,464), United Bank (Rs 3,508,921,464), Muslim Commercial Bank (Rs 2,105,352,405)
and Allied Bank of Pakistan (Rs 1,403,567,876).
According to the Ministry of Industries and Production, in view of the
imminent privatization of the affected banks, resolution of Pakistan Steel debt cannot be
deferred any longer. The government's approval for issuance of Government of Pakistan
guaranteed bonds to the above mentioned banks with the following covenants will also take
into account the outstanding Medium Term Loan (MTL) against Pakistan Steel: Face Value,
total amount outstanding in the books of banks against Pakistan Steel Mills Corporation
(Pvt) Limited as on June 6, 1998 (already reconciled between banks and Pakistan Steel),
Date of Issuance of Bonds (July 1, 1998), Tenure (15 years starting from July 1, 1998),
Moratorium (5 years, starting from July 1, 1998), Amortization of Principal (21
half-yearly installments starting from July 1, 2003), Rate of Profit on MTL (14 per cent
per annum or average of STFB/Treasury Bills, whichever is less), Due Dates for payment of
Principal Installments and Interest/Mark-up (January 1 and July 1 of each year), Start of
profit/mark-up payments (July 1, 2003), Start of Principal Installment (July 1, 2003),
Last Payments (July 1, 2013), Surety (Government of Pakistan).