ISLAMABAD: Pakistan International Airlines Corp Ltd (PIAA) has announced plans for a scheme of arrangement to bifurcate its operations, aiming to restructure and reorganise the company.
The Extraordinary General Meeting (EOGM) of PIAA is scheduled for April 20th, 2024, in Karachi, where members will vote on corporate restructuring, including the separation of the business into two segments, namely the Core Undertaking (PIA) and the Non-Core Undertaking (Holdco).
This move follows an update on January 11th, 2024, regarding the divestment of a 51 percent stake in PIAA, approved by the Privatization Commission.
The Scheme of Arrangement was shared with the board of directors on March 25th, 2024, with approval granted on March 28th, 2024. Under the scheme, the non-core undertaking, including hospitality, investments, real estate, and others, will be transformed into PIA Holding Company Limited (Holdco), while PIA will retain its aviation business.
To safeguard existing shareholders, their equity holding in PIAA will be replaced with fresh shares issued in Holdco, maintaining the same percentage.
The scheme aims to ensure financial stability for PIA, requiring significant capital expenditure over the next five years. It will also allow the government to restructure PIA, operating as a subsidiary of Holdco, facilitating the privatization process to bring in a strategic partner.
Details of the Scheme of Arrangement reveal that before bifurcation, total assets amounted to Rs171 billion as of September 2023. Post-split, the Core Undertaking and Non-Core Undertaking assets will be Rs147 billion and Rs25 billion, respectively. To protect the existing shareholders, their equity holding in PIAA will be void and replaced with fresh shares issued in Holdco as per the same percentage.
Brokerage Arif Habib Limited said out of total liabilities of Rs831 billion as of September 2023, Rs629 billion will be allocated to the non-core segment, while Rs202 billion will be allotted to the core undertaking.
Currently, PIA's net equity stands at -659 billion rupees, with the post-arrangement net equity of the core undertaking projected to be -56 billion rupees, while the remaining -604 billion will transfer to Holdco. Upon approval by the company, the scheme will be subject to sanction by the Securities and Exchange Commission of Pakistan (SECP).