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Posted 29 September 2007 - 06:00 AM
ARIF RANA ISLAMABAD (September 29 2007): The idea of Pakistan Steel Mill Corporation (PSMC) initial public offering (IPO) may not take off in the near future as the issue faces technical and legal complications. The government is required to de-bundle its immovable assets and make its only that portion of the land part of the offer which will remain in industrial use for PSMC.
The remaining portion of the land will be excluded from the offer documents to remove ambiguity that was one of many reasons of reversal of its first strategic sale.
Sources said that the Ministry of Industries and Production has been asked to make necessary changes, including de-bundling of its land, to address the legal and financial issues being raised at different forums.
After reversal of the first-time sale by the Supreme Court of Pakistan, the Privatisation Commission had conceived the idea of IPO for two reasons: to assess the market value of PSMC issue, and make it a base for fixing reference price for offering it for strategic sale.
PSMC has become a hard nut for the Privatisation Commission to crack. The Supreme Court of Pakistan verdict in PSMC sale and questions raised therein made the officials of the Privatisation Commission cautious of its complications. They can not dare now to offer to the buyers without addressing the legal and financial issues involved in it.
SC among others issues had also raised the question of value at which the Privatisation Commission offered for strategic sale. Meanwhile, the Ministry of Industries has clear Rs 4.5 billion for PSMC repair and overhauling.
PSMC has undergone financial restructuring thrice. In August 1986, the outstanding debentures and short-term loans were converted into Participatory Term Certificates (PTC5) of Rs 11.05 billion and Medium Terms Loan (MTL) of Rs 1.79 billion guaranteed by the government.
PTCs carried interest rate of 11 percent starting from 1985-86. The principal was redeemable in 15 annual instalments of Rs 700 million from June 30, 1991. MTL also carried interest rate of 11 percent and was payable in bi-annual instalments after the grace period of three years.
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