Karachi, May 14, 2012 (PPI-OT): Govt. to extend sovereign guarantee to NITL worth PkR 12.2 bn
After the 2008 stock exchange crisis, NIT launched “NIT state enterprise fund (NIT-SEF)” in January 2009 to counter selling pressure from local and foreign investors, on advice of the Government of Pakistan (GoP) with an asset size of PkR 20 bn.
According to Alfalah Securities Limited, the fund made investment in eight listed companies stocks namely OGDC, PPL, PSO, NBP, PTCL, SNGPL, SSGCL and KAPCO. The GoP issued guarantee for NIT-SEF in favour of NBP, SLIC, Employees Old Age Benefits Institution (EOBI) and a syndicate of banks in the form of repurchase agreement-REPO having maturity not exceeding 3 years.
Out of PkR 20 bn, PkR 17.20 bn has been already drawn by NIT and to pay back the debt in full, NIT required PkR 12.20 bn in cash which could be generated through sale of shares acquired by NIT under NIT-SEF. To avoid panic selling in the market, NIT had now proposed to extend the sovereign guarantee against the outstanding balance of PkR 12.20 bn for a period of two more years, on the existing terms and conditions effective from January 1, 2012. NIT during this period would retire the entire fund gradually. On the advice of Prime Minister Gilani, the finance minister has sent a summary to Economic Coordination Committee for an approval. This sovereign guarantee bodes well for the stability of stock market and is likely to be taken positive by market participants.