Pakistan’s leading banks join to set up Corporate Restructuring Firm

Pakistan's leading banks join to set up Corporate Restructuring Firm

Pakistan’s 10 banks signed an agreement on Friday to establish Pakistan Corporate Restructuring Company Ltd (PCRCL) at the State Bank of Pakistan (SBP).

In the presence of SBP Governor Dr Reza Baqir, officials of Habib Bank, National Bank of Pakistan, United Bank, MCB Bank, Allied Bank, Meezan Bank, Bank Alfalah, Bank AL Habib, Habib Metropolitan Bank and Faysal Bank signed the agreement.

Under the provisions of Corporate Restructuring Companies Act 2016 with an initial paid-up capital of Rs500 million, the banks have decided to establish the Corporate Restructuring Company (CRC) — first of its kind company in the country.

The major goal of setting up the firm is to help the government in reviving sick industrial units.

The CRCs, under the CRC Act 2016, are empowered to acquire, restructure and resolve the non-performing assets (NPAs) of financial institutions and thereby reorganise and revive commercially or financially distressed companies.

Corporate restructuring companies are specialized institutions with skills in coping with non-performing loans (NPLs) and corporate restructuring.

These companies through aggregation of NPLs will be well positioned to negotiate with sick units and finalise restructuring of loans from multiple lenders negotiating simultaneously with the borrower.

It is expected that the CRCs will evolve as vibrant economic agent, contributing towards the revival of sick industrial units and generating employment opportunities.

The total banking sector’s NPLs stand at Rs758 billion as of Sept 30, 2019. Total NPLs amount includes loans against such sick industrial units, which can be revived and rehabilitated, provided the NPLs are restructured promptly and the sponsors of sick units also inject fresh equity.

The Securities and Exchange Commission of Pakistan (SECP) has granted license to the PCRCL on Dec 31, 2019.

The SBP official appreciated banks’ supportive role of regulator in incorporation and licensing of the PCRCL and engaged with the federal government to introduce amendments in relevant laws and strengthen banking courts in order to help government agenda of achieving institutional reforms.