December 6, 2021 (MLN): In a recent development, Hascol Petroleum Limited (HPL) and Vitol, the single largest shareholder of the company, have offered a settlement of Rs54.5 billion worth of debt, owed to different banks, as reported by The News yesterday.

This development came after for the first time since the company ran into a financial crisis.

As per the proposal of the company for the settlement of the debt, the company has chalked out a detailed strategy in this regard. Total residual debt is Rs54.5 billion, out of which up to Rs9 billion will be provided by two banks jointly, marked as an active working capital facility that will be carved out for operations of the company.

The remaining debt of Rs45.5 billion would be reduced by 15 percent i.e, Rs6.8 billion through a debt-equity swap to be offered to all remaining debt participants in the proportion to their share, the document said. The unsubscribed portion would be offered to other lenders or would remain part of the residual debt, suggested the financial restructuring plan, it added.

Under this plan, it has been proposed that right shares worth Rs8 billion would be issued by Hascol to inject fresh equity into the company. The document added that the resulting proceeds would be used to reduce the remaining debt of those participating Term Lenders that would agree to reinstate their working capital limits to the extent of their adjusted amount.

Given this, Vitol, a Dutch trading giant, would continue to provide a minimum of $12 million Open Credit facility and a $15 million Hold Cover on Vitol purchases.

The company also proposed that payment of Letter of Credit (LC) term for the bank and Vitol facility would be the same as 60 days, whereas Vitol Dubai would maintain a minimum shareholding of 40 percent in Hascol until at least 50 percent of the Residual Debt was repaid.

Vitol, as a supplier would also support any shortfall in working capital until December 2026 and 40 percent of the Residual Debt repaid would be plowed back upon each repayment into the working capital facility, to be regarded as an incremental LC facility, as the document read by The News.

All product procurement would be done transparently on an arm’s length basis via tendering process, the proposal said, adding that however, award of shipments would always be subject to Vitol’s Last Right of Refusal (Vitol has the right to match the lowest offered price and supply the tendered oil) as agreed in the existing Supply Agreement between Vitol and Hascol.

Hascol would sell its lube plant and three Port Qasim plots of land in 2022, while the sale proceeds would be injected into the company, the proposal highlighted.

When approached the company’s representative to get the company’s stance on the aforesaid proposal, he has not responded to Mettis' request for comment on the same at the time of writing.

To recall, Hascol suffered significant losses in 2019, which were then declared in the company’s financial statements.

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