According to the well informed sources,Pakistan Steel Mills is likely to seek a third bailout package of PKR 6 billion to pay interest on loans of two previous bailout packages.
This proposal was discussed at a meeting of Board of Directors held in the first week of current month wherein it was decided that the issue of payment of mark up as decided earlier be taken up with Ministries of Production and Finance for resubmission to the ECC.
Mr Shahid Mohsin Shaikh CRO explained to the Board that a business plan was prepared for the financial year 2012-13 and presented to the Economic Reform Unit on May 7th 2012.A bailout package worth PKR 14.6 billion for revival of PSM was approved in the Cabinet Committee on Restructuring on June 28th 2012 and subsequently in the ECC on July 24th 2012,allowing quarterly disbursement of tranches from the National Bank of Pakistan to PSM as follows:
In July 2012,term loan was PKR 3.8 billion;mark up PKR 300 million which makes the total PKR 4.1 billion which was disbursed on August 16th 2012.
In October 2012 NBP loan stood at PKR 5.050 billion,mark up PKR 300,total PKR 5.350 billion.In January 2013,PSM will get an installment of PKR 2.6 billion and mark up of PKR 400 million.In April 2013,PSM will receive an installment of PKR 2.15 billion.
This implies that PSM will receive net PKR 13.6 billion and PKR 1 billion will be deducted as mark-up in advance.
The Board meeting of October 15th 2012 provided projections'of cash flow for the year 2012-13 and the expected shortfall in operating cash flows as PKR 4.5 billion.The amount of mark up on loans not covered under the bailout is expected to be PKR 2.4 billion,thus making the total shortfall after incorporation of bailout at PKR 6.9 billion.
Subsequently,PSM has been successful in establishing LC at a margin of 50%with deferral period of 120 days.Suppliers of coal have shown willingness to LC deferral period of 120 days,and the participant in iron ore tenders has offered LC deferral period of 180 days.
As the shortfall had occurred in the earlier months of December and January where production level was expected at 45%,the deferral of raw materials payment helped PSM overcome this shortfall.
