Issuer: Power Holding Limited
Guarantor: Government of Pakistan
Size: PRe239 billion across three tranches
Banks: HBL, Allied Bank, National Bank of Pakistan, Meezan Bank and UBL (mandated lead advisers and arrangers)
Date: June 2023
Pakistan’s energy sector has been caught for years in a vicious cycle of debt, which every so often threatens to develop into a full-blown crisis.
At its core, deep structural and operational inefficiencies in the sector cause a cascading cycle of non-payments throughout the energy supply chain, creating a phenomenon called circular debt, or the perpetual accumulation of debt owed to power-generating companies.
Pakistan’s banks must step in often to avert a debt crisis, and last year, a group of local lenders did just that, arranging a PRe239 billion ($850 million) multi-tranche debt financing across Islamic and conventional formats for Power Holding Limited, a government-owned company established with the aim of reducing power-sector liabilities through borrowings from financial institutions.
Pakistan’s banks must step in often to avert a debt crisis, and last year, a group of local lenders did just that
The financing – the largest so far in the country’s power sector – was split across three tranches (PRe115 billion; PRe110 billion; and PRe14 billion) with the proceeds used to fund the repayment of the liabilities of several distribution companies, mitigating the debilitating effects of circular debt on the entire energy chain.
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