Hascol Petroleum Ltd on Tuesday stated that the company is concluding negotiations with bankers to address its “heavy burden of accumulated debt”.
A statement posted on Pakistan Stock Exchange’s (PSX) website states that the company chairman Sir Alan Duncan shared with investors that the troubled oil marketing company is working on a restructuring agreement which will be announced soon. The agreement would involve replacing short-term expensive debt with long-term affordable debt and some new equity.
Hascol has been battling financial challenges since 2018. Its revenues have declined, while losses and loans have increased, sending its share price down from more than Rs300 three years ago to just over Rs6 apiece in recent days.
Duncan said, “If and when we succeed in this refinancing of the company, your board is confident that [the company will]… be restored as a profitable concern”.
Its net consolidated loss for 2020 amounted to Rs25.2 billion versus a net loss of Rs35.1bn in 2019. It has not filed its financial accounts since 2020. The company also discovered “inaccurate entries in its 2019 accounts” and subsequently restated its results from 2018 through 2020.
Last year, regulatory actions against the company in Khyber Pakhtunkhwa for unauthorized storage and selling of petroleum products further spoiled its reputation.
While referring to the build-up of liabilities on its balance sheet, Duncan added servicing that debt has cost as much as the scale of the company’s losses saying, “Hascol’s main pressure is that it has been seriously constrained by tight liquidity,” he continued after hailing the government’s “positive steps on forex protection and retail margins” that will help oil marketing companies.
The company’s short-term borrowings amounted to Rs33bn, down by 10.7 pc from the preceding year. As per the notes attached to financial statements of 2020, these short-term loans from different banks were at interest rates ranging from one-month Karachi interbank offered rate (Kibor) plus 1.5pc to as high as Kibor plus 20pc.
The company is making efforts to persuade banks to “partially convert their outstanding debt into equity” in order to lower its “onerous debt service obligations”
In addition, the management is looking for a “significant reduction” in its operating costs, recapturing its market share, disposal of non-core assets, shoring up of working capital, and the raising of additional equity to reduce leverage.