ECC nods govt guarantee for $142m Roosevelt Hotel bailout

ISLAMABAD: The Economic Coordination Committee of the Cabinet (ECC) on Thursday gave its nod to a government guarantee of $142 million (Rs31.2 billion) in the favour of National Bank of Pakistan (NBP) to bail out the financially-challenged Roosevelt Hotel Corporation (RHC).

Federal Minister for Finance and Revenue Miftah Ismail presided over the ECC meeting at the Finance Division. “The ECC, after discussion, approved the GoP (Government of Pakistan) guarantee for the financing facility… as a loan in accordance with facility agreement between the RHC and NBP (National Bank of Pakistan),” a statement said. The Ministry of Aviation had submitted the summary urging for a bailout package for the New York based hotel.

The ECC back in 2020 had approved this financial assistance, but owing to certain circumstances, a government guarantee could not materialise for the same. Pursuant to the decision, the Finance Division had arranged the financing facility as a loan from the NBP.

Earlier on October 5, 2020, the Finance Division had approved the term sheet and issued a Letter of Comfort (LoC) for which validity was extended from time to time. As per the agreed terms of the facility agreement, the GoP guarantee to be issued in favour of NBP was required.

However, the GoP guarantee was put on hold on the advice of the Office of Attorney General of Pakistan as a result of litigation by Tethyan Copper Company Ltd in a Reko Diq case in British Virgin Islands (BVI) court.

Currently, the Government of Pakistan and Balochistan and TCC have now entered into a Standstill Agreement whereby all litigation has been suspended, inclusive of enforcement of the proceedings in the BVI, where PIA-IL is registered, against assets owned by PIA-IL till December 15, 2022. Now the Finance Division had asked the aviation ministry to seek specific approval of the ECC for the issuance of GoP guarantee in line with the facility agreement between the RHC and NBP.

The RHC, owned by Pakistan International Airlines-Investment Limited (PIA-IL), had suffered huge losses during the Covid-19 pandemic and was subsequently shut down in December 2020 to avoid further financial deterioration.

Moreover, the Ministry of Energy (Petroleum Division) presented a summary on syndicated running of finance facilities for PSO (Pakistan State Oil). PSO’s liquidity issues were discussed in the ECC meeting on July 31, 2022. In that meeting, it was also discussed to arrange a government guarantee loan to ease out the liquidity issues of PSO.

A consortium of banks, including ABL, NBP, MCB, UBL, and HBL, was formed for sanctioning a loan amounting to Rs50 billion to PSO through a GoP guarantee. As the issuance of guarantee will take time, the banks have shown their willingness to initiate the process of issuing loans on Letter of Comfort.

In view of the above, the ECC approved the proposal to issue a letter of comfort in favour of PSO for raising a loan facility of Rs50 billion on urgent basis. However, the Finance Division will divert some other allocated guarantees to PSO without exceeding Rs105 billion domestic guarantee limit for the first quarter of this calendar year.

The Ministry of Industries and Production tabled a summary for revision of price of imported urea. The ECC meeting learnt that the price of imported urea stored in NFML warehouses was lower than locally manufactured urea. In order to remove disparity in the prices of imported and locally manufactured urea, the ECC approved the proposal that Dealer Transfer Price (DTP) of 50kg imported urea may be revised upward at Rs1,805/bag by NFML (exclusive of dealer margin of Rs145/bag) for the stocks sold between June 23 to July 25, 2022.

Further DTP of remaining stocks held with NFML may be revised upward to Rs2,150/bag (exclusive of dealer margin of Rs50/bag) with effect from July 26, 2022 onwards. The ECC also directed the concerned authorities to fix the urea prices and dealers’ margin in future after the prior approval of the ECC.

Federal Minister for Commerce Syed Naveed Qamar, Federal Minister for Power Khurram Dastgir Khan, Shahid Khaqan Abbasi, MNA/ex-PM, Minister of State for Finance and Revenue Dr Aisha Ghous Pasha, Minister of State for Petroleum Musadik Masood Malik, SAPM on Government Effectiveness Dr. Muhammad Jehanzeb Khan, Coordinator to the PM on Economy Bilal Azhar Kayani, Coordinator to PM on Commerce & Industry Rana Ihsan Afzal, federal secretaries and senior officers attended the meeting.