The Business | EDITORFrIidaAy , FebL ruary 210, 26020 Is ChenOne, parent company Chief Editor about to make a comeback? Part 3 Irfan Athar Qazi HASSAN NAQVI is also a fact that banks have a vested inter - sent. However, their formal approval is in the new investor whereupon the banks will est in ensuring that the company is able to process. “We are still awaiting the approval also be requested to provide an equal amount E-mail: [email protected] he entire textile industry faces continue repaying its loans and would gen - of the banks set out in the hereto. of Rs350 million for Exports Based Limits them. And while facing those is - erally seek to avoid placing the company in Once these approvals are received, we to meet the working capital requirements. [email protected] sues, the industry as a whole had a a situation where the only solution to repay - will execute this term sheet and proceed to The plan stated that on account of prevailing verTy good year in 2011, growing revenues ing its loans would be to liquidate the whole finalise a scheme of arrangement in accor - situation, the fact that the Chenab Ltd’s oper - by 40.8 percent to Rs713 billion, according company. Banks start restricting working dance with our counsel’s advice,” the HBL ations are suspended since 2017 and in order Tijarat House, 14-Davis Road, Lahore to a compilation of financial data of all pub - capital financing generally when they do not letter stated. Chenab group’s short-term to make the project economically and finan - licly listed textile companies compiled by have confidence in the company’s manage - loans from different banks and financial cially viable, the rate of markup on the 0423-6312280, 6312480, 6312429, 6312462 the State Bank of Pakistan. Hence, Chenab ment to be able to either generate enough houses are Rs4,344 million whereas its rescheduled loan be reduced to five percent Ltd cannot cite that as an excuse: everyone cash flow from that financing to repay the long-term loans are Rs5,131 million. It per annum. Cell # 0321-4598258 else was also facing those exact same issues loan, or they do not trust the management to owes Rs1,739 million to Habib Bank, “The annual mark up on tier I loan will be and managed to do very well nonetheless. repay the loan even if they earn enough Rs1,366 million to United Bank, Rs1,227 started from the date of sanction of plan So what else could explain that massive money to do so. Neither of those reflects million to Bank of Punjab, Rs844 million to whereas the mark up to be charged at three 1st Floor Ahmed Plaza near Zong Office drop? Whispers of impropriety Some in - well on a company’s management, and that Askari Bank, and Rs601 million to Allied percent per annum for tier II loan for the first dustry observers – especially competitors of is certainly an image that Chenab Ltd had to Bank. Apart from that the group owes short 7.5 years will be considered as contingencies Susan Road, Faisalabad, Ph: 041-8555582 Chenab Ltd – allege that the company has struggle with for several years. and long term loans another 17 banks and fi - in the future projections of the company and engaged in financial impropriety, moving Indeed, matters got so bad, that by 2017, nancial institutions including BankIslami, thereafter it will be accrued at five percent cash overseas to buy assets and hollowing one of the company’s lenders, Saudi Pak In - National Bank of Pakistan, Albaraka Bank, after the payment of tier I loan,” Mian Latif ISLAMABAD / RAWALPINDI out the Pakistan-based business in order to dustrial and Agriculture Investment Com - Habib Metropolitan Bank, Silkbank, Stan - stated in his submission before the LHC. N-125 Circular Road, Ph: 051-5551654, secure write-offs of the loans. pany sued the company for repayment of its dard Chartered Bank, MCB Bank, Citibank, Mian Latif also mentioned that the mark-up 5532761, Cell # 0300-8567331 Kashif flatly rejected the allegations. “If loans, trying to force a liquidation of its as - Faysal Bank, Saudi Pak Industrial and Agri - of tier I and tier II will be accrued at five per - KARACHI we had done offshore investments or had sets to be repaid, which resulted in the La - culture Investment Company, Pak Oman In - cent per annum and will be paid within three 3rd Floor Kehkashan Mall 172-I Block II PECHS moved our capital to offshore locations we hore High Court ordering the company to vestment Company, First Punjab Modaraba, years after the payment of entire principal Opp Rehmania Masjid Main Tariq Road wouldn’t have been present in the country shut down operations on June 20, 2017. Pak Libya Holding Company, Pak Kuwait amount. However, markup calculated at 3pc Ph: 021-34524550, Cell # 0300-8251534 and negotiating with the government for re - Chenab owes Saudi Pak Rs357 million. Investment Company, Orix Leasing and for tier II and total existing outstanding structuring of our debts,” he said. “People Chenab appealed that decision to the Orix Investment Bank, First Credit and In - markup be waived off on successful comple - who are involved in offshore investments, Supreme Court, which overturned the La - vestment Bank and First National Bank tion of repayment plan of fresh loans. Fol - they sell the machinery, cheat banks, and hore High Court’s decision on January 8, Modaraba. According to the plan of restruc - lowing which the LHC on December 5 last save themselves. But we kept on trying for 2019. Now, however, it appears that the tide turing of Chenab Group’s debt, the total year, accepted the interim relief and the com - settlement because we wanted to run the may finally be turning, particularly as the debt of Chenab Ltd would be divided into pany is temporarily allowed, till the disposal Debt liabilities Chenab Group again as 14,000 people are next generation of the family begins to take two equal fresh loans i.e. Tier I Loan and of the main application, to resume the com - employed in it.” Although he rejected the more control. The restructuring plan On Tier II Loan each comprising of Rs4.738 mercial operation and production units of the offshore investment allegations, he added September 28, 2019 Mian Muhammad Latif billion. The tier I loan will be paid in 30 company. “Company shall keep this court that the US market was huge and they had a through his counsel Advocate Salman Butt quarterly installments (7.5 years) commenc - informed of the developments in operations lot of business there due to which they es - filed a civil miscellaneous application in the ing from the date of sanction of the pro - of the company by filing monthly statements Pakistan’s Total Debt and Liabilities (TDL) continue tablished an office there. “[Our customers in LHC, attaching a restructuring plan of the posal. The tier II loan will be paid in 26 through the official liquidators and finaliza - to increase consistently and at a very rapid pace. In a the United States] asked us to develop ware - company, along with an instant application quarterly installments (6.5 years) commenc - tion of the rescheduling plan and the scheme house and office in US to cut their costs to for grant of interim relief in the form of stay ing from the date of completion of tier I of arrangement,” Justice Jawad Hasan an - debt policy statement laid before the parliament, the minimize their expenses and they shifted the of operation of the winding up order, to re - loan. Kashif shared that his family jointly nounced in an open court on December 5, Ministry of Finance has acknowledged that debt and lia - burden completely on vendors,” Mian strain the joint official liquidators from pro - holds 60.1 percent of the company. 2019. Will it work? The company appears to bilities of the country that stood at Rs 29.879 trillion at Kashif said. “They asked us to bring our ceeding further in the matter, and to allow “To raise funds for meeting the working be clearly dedicated towards making the core the end of fiscal year 2018 had crossed Rs 41.489 tril - products there, keep it in the warehouse and the management of Chenab Group to take capital requirements, we brought an investor business function, going so far as to sell off supply it locally,” he added. steps for rehabilitation of the spinning, by disinvesting one-third of our sharehold - some real estate that – while technically lion by the end of September, 2019, showing a massive There were also allegations that the stitching and weaving units of the company ing in the company (20 percent) to this in - owned by the company – is likely thought of increase of 39 percent. These liabilities which were 86.3 ChenOne stores in the UAE and Saudi Ara - (Production Units). Mian Muhammad Latif vestor at the rate of Rs15.20 per share for a by the Latif family as their family properties. percent of GDP in fiscal year 2018 had risen to 94 per - bia continue to do brisk business, but the through his counsel submitted that he has a total consideration of Rs350 million.” Mian That willingness to sell non-core assets to company does not repatriate its profits from strong case against the liquidation order as Latif through his counsel also agreed to sell make the business work is likely what per - cent of GDP by end June, 2019. Total public debt in - there to repay their loans. When asked about they attached a letter from Habib Bank Ltd some of the non-core assets of the company suaded Habib Bank that Chenab’s manage - creased by Rs 7,755 billion during 2018-19, out of that, Kashif said that those stores are strug - (HBL) – the largest bank in Pakistan and the including open land comprising 42 acres in ment is serious about resuscitating their which Rs 3,635 billion was borrowed for meeting the gling as well. biggest creditor to Chenab Ltd – in which Khurrianwala Faisalabad, three houses in business. The issue, however, might be that federal budget deficit, Rs 3,061 billion was due to cur - “We had five stores in Dubai but we are they have confirmed that the restructuring of W-Block, Madina Town Faisalabad, one the group is a little too distracted by other only left with one in Saudi Arabia. We had debts of the company is under process, and house in Y-Block, Madina Town Faisal - ventures. Kashif, for instance, spoke of the rency depreciation, Rs 927 billion was offset by higher about three stores in Saudi Arabia previ - is being finalised, in following terms: “We abad, Office at Park Tower Clifton Karachi, restaurants that he and the family are now cash balances necessary for effective cash management ously and we faced losses there as well and Habib Bank Ltd, confirm that we are in the weaving unit at Khurrianwala –Sheikhupura invested in, including Sultan Basha, a newly as the government is committed to zero borrowing we are only left with one store.” Missed or - process of finalising a term sheet for the re - and spinning unit at Toba Tek Singh for an constructed Lebanese restaurant in Lahore. ders, and the banks close in In his interview structuring of Chenab Ltd’s debt and enter - approximate consideration of Rs1355 mil - They also acquired Urban Café, also in La - from SBP and Rs 132 billion was the difference between with The Express Tribune, Mian Latif said ing into a scheme of arrangement for the lion. Mian Latif stated that 75 percent of hore. But the biggest venture of the group is the face value and the realised value of PIBs. The impact that the company missed orders from the same. We have arranged legal and financial sale proceeds – which are approximately likely to be “Alley Group of Colleges”, of exchange rate was favourable during the first quarter United States because of issues with its elec - advisers for this purpose too. Up to now, Rs1,016 million – will be utilised towards which launched last week. So which is it? Is of the ongoing year which decreased the rupee value of tricity supply, caused by the unreliability of Habib Bank Ltd, Bank of Punjab, Habib the adjustment of debt while the remaining the family dedicated revitalising Chenab supply from the state-owned utility compa - Metropolitan Bank and BankIslami have ob - 25 percent, which is approximately Rs339 Ltd, or are they going into the restaurant and external public debt stock at end-September, 2019. nies. One other reason cited by the company tained internal approvals for the draft term million, will be used to meet the working education business? The answer will likely It needs to be noted that there have been some spe - for their woes: banks refusing to lend to sheet.” capital requirements of the company. determine the extent to which the restructur - cial developments with regard to the TDL during the re - them, particularly for working capital fi - The HBL letter further reads that Allied According to the plan, the initial working ing plan is successful. nancing. While this may certainly be true, it Bank Ltd has also conveyed its verbal con - capital of Rs350 million will be injected by Concluded cent past. One of the major reasons for the sharp increase of the TDL was a massive devaluation of the Pak rupee which contributed to a rise of over Rs 3 tril - lion although the level of debt denominated in dollar terms had not increased in the same proportion. An - other important development was the re-profiling of Sinophobia domestic debt where the government re-profiled the EDWARD HON-SING WONG existing stock of SBP borrowings from short-term to medium-term to long-term. Re-profiling took place hinese people mainly in the month of June, 2019 which increased the have faced per - share of long-term debt in total domestic debt from 46 ceptions of being "unhygienic" and "dirty" percent at the end of June, 2018 to 73 percent at the C long before SARS and the close of June, 2019. This structural shift has reduced the coronavirus came along. financing risk for the government as average time of As early as the 19th cen - maturity of the domestic debt portfolio has increased tury Opium Wars, the Chi - from 1.6 years at the end of June, 2018 to 4.2 years in nese nation was referred to as the "sick man of East June, 2019 which is very close to the long-term target Asia". This slur took a lit - set by the government. Profits of SBP also witnessed a eral turn as Chinese mi - steep decline during 2018-19 as the central bank in - grants to North America curred heavy exchange losses on its external liabilities. came to be associated with none of which were resi - poor hygiene and prone - dential. Other factors contributing to the sharp rise in domestic ness to disease. Chinese people were in - debt included a sharp rise in domestic interest rates, ex - In the late 19th century, deed living in poor condi - change rate depreciation, some legal constraints on the in Canada, it was not un - tions, but that was hardly revenue side and an overall slowdown in the economy common for white-owned their fault. Despite re - that resulted in lower than budgeted revenue collection. restaurants to advertise that peated petitions to improve they did not employ Chi - infrastructure, the local au - nese workers. One such thorities had neglected the The renewable revolution restaurant in the city of immigrant area for years, KHURRAM HUSAIN three cents by 2030. Last year, the Interna - revolution, this one does not rely on large be repaid through the consumer’s power Victoria claimed, "the seeing it as a low priority. tional Renewable Energy Agency (IRENA) operators, with billions of dollars in invest - bills. The vendor will provide the technol - stomach of a person of re - As a result, Chinatown was here is far too much negativity in found that “83 per cent of the utility-scale ment. Small traders are now importing the ogy, installation and after sales service. The the air, and some feedback I have PV pipeline commissioned for 2020 will technology that can bring an entire home’s distribution company will advertise the fined tastes must revolt at filled with garbage and received from those who follow my boast prices lower than the cheapest fossil- power bills down to zero. In 2015, the coun - scheme through its monthly bills, telling the the mere idea that his din - manure, as it lacked a articles says they are keen to hear what sug - fuel alternatives.” try’s first ‘net metering’ regime was initiated consumers that there is no upfront cost. The ner has been cooked by a sewage system, while its T Chinaman," shortly after residents lived in over - gestions I might have for the government, As per their survey, utility-scale solar by Nepra, the power sector regulator. This bank will pay the upfront cost, and the loan rather than just relentless criticism. It is a fair projects will have an average tariff of 4.8 enables a power consumer to generate elec - will be repaid from the savings that the con - replacing its Chinese cooks crowded spaces lacking challenge and I accept — so here goes. cents per unit, beating the target set for the tricity on their own premises and sell what - sumer gets from the installation. For the first with Germans. ventilation. I have made it clear in the past that I am a Sunshot Initiative. They find that solar and ever they are not using back into the grid. As year or two, the savings are used to repay the This perception of Chi - It is because of govern - big fan of the renewable energy revolution wind will, in this year, beat the 700GW of of 2010, large sections of our power bureau - bank (depending on the repayment plan the nese people as unhygienic ment neglect that these that is currently sweeping the world. I am total operational coal fired power generation cracy had not heard of such a thing. For a consumer chooses), and after that the savings was often drawn from bad communities experienced very keen to see this revolution reach its full worldwide, meaning the revolution will hit a couple of years after 2015, when the regula - belong to the consumer. living conditions in China - higher rates of contagious potential here in Pakistan and have some tipping point in both tions were announced, The distribution companies can be told towns. In 1887, Vancou - diseases, including tuber - ideas on how it can be catalysed. financial and opera - the number of net me - that every unit of power that you buy from ver's Chinatown was culosis. Sewage was fi - First, consider how the industry is devel - tional terms in this tering license applica - rooftop solar entitles you to an equal num - described by reporters as nally introduced in 1896 oping. Back in 2010, the Obama administra - year. From here, tions actually ber of units to be purchased from the grid at "an eyesore to civilisation" but overcrowding was not tion launched what they called the Sunshot there is no looking processed remained a reduced price. They can be given bench - and "pest-producing". In resolved. Instead, the city Initiative, an ambitious drive to bring down back. We are in the near zero. Today, marks to reduce their receivables and in - 1890, during a cholera authorities often resorted the price of utility-scale, grid connected solar middle of a pro - hundreds of these ap - creasingly told to rely on their own liquidity scare in Vancouver, the to the demolition of houses power to a point where it achieves what they found revolution in plications have been to run their business, with appropriate local press demanded that in Chinatown on the basis call ‘grid parity’, or the same price as the power generation processed, with the bonuses for performance. Bringing the re - the government take action that they were "dangerous electricity that is already present in the that is perhaps simi - number rising expo - newal revolution into the homes of millions against that city's China - to the health of the city", power grid. At that time, they figured this lar to the rev olution nentially and process - of people around the country is a visible town. leaving many Chinese grid power price was six cents per unit, in communications ing time coming marker of progress, and will have a lasting Despite the lack of evi - workers homeless. whereas solar was 28 cents (for utility-scale that cellular phones down significantly. impact on power sector development in the dence that cholera had Today, conditions in grid connected power), and they targeted to ushered in about a How can it be future. Our power sector difficulties, such as arisen from the neighbour - Chinatowns across Canada bring solar down to six cents by the year decade and a half catalysed? The energy the continuously rising circular debt, will 2020. ago. In the late ministry simply needs not be solved through reforms because the hood, the city council des - have markedly improved, Likewise, they brought down the price of 1990s, it was rare to to put some incentives power of the entrenched, vested interests — ignated Chinatown an but the stigma has re - residential and commercial solar power from see people with a for the power distri - whether the bureaucracy, the rackets, or the "official entity" in the mained and the SARS and 52 and 40 cents to 16 and 11 cents respec - mobile phone. bution companies to large independent power producers — is too medical health officer coronavirus outbreaks have tively by 2017. By the end of this year, they Today, it is rare to issue more net meter - powerful for the state to manage without up - rounds and health commit - just added more fuel to the want these numbers down to 10 and eight see someone without one. It will be the ing licenses. They can do this by helping cre - heaval. Ultimately, these chronic problems tee reports, a designation fire. The Lunar New Year cents respectively. It is quite possible these same with solar panels. By the time the ate a partnership between the distribution will only disappear when technology makes that placed the neighbour - is an especially busy time targets have already been reached or sur - 2020s end, it will be rare to find someone companies, the banks and authorised suppli - the entire apparatus anachronistic, much like hood under closer scrutiny for Chinese businesses, but passed. who does not have a solar panel in their ers of solar panels whose products have cellular technology made large-scale land - for by-law infractions. this year because of news In utility-scale, grid connected solar home, office or factory. passed quality control guidelines set by the line telephone infrastructure obsolete. Re - Other designated entities of the epidemic, Chinese power, they passed the six cents mark by Our challenge here is to catalyse this Alternate Energy Development Board. The forms to mitigate the rise of the circular debt included sewerage, scav - malls and restaurants 2017 instead, three years ahead of schedule. process, not sit and wait for it to arrive on its banks will provide the capital for each home- are important, but why not start pushing enging sites, slaughter - across the country re - Now they are targeting to bring it down to own. Unlike the mobile communications based installation, much like an auto loan, to large-scale solar installations as well? houses and pig ranches - mained empty.