960410

Last minute snag

in UBL sale: PC puts off

technical close

RECORDER REPORT

ISLAMABAD: The Privatisation Commission has declined to execute a technical close on the sale of management stake of United Bank Limited despite receipt of certification of the deposit of $8 million by the buyers and finalisation of the terms of the Sale Purchase agreement, it is reliably learnt.

While the Commission has reportedly taken cover behind the case in the Lahore High Court for delaying the close, highly placed sources told Business Recorder that informally the buyers have been told that the authorities would like a more experienced management team at the helm of UBL than that named by the Saudi Basharahil Limited.

The buyers reportedly construe this advice to mean that new management of a privatised UBL be headed by a person proposed by the top authorities.

Since the sale involves Saudi Royalty, the Saudi Ambassador is now said to have come into the picture to avoid any diplomatic embarrassment between the two brotherly Muslim countries.

The representatives of the Saudi Basharahil Limited were informed on Wednesday that the technical close would now take place on April 15 and not on April 10, 1996. Last Monday certification by Ernston Young of U.K. was received that the balance of $8 million had been transferred to the State Bank of Pakistan's account with Fed of New York.

By Tuesday evening all the terms and conditions of the Sale Purchase agreement, including those desired by the State Bank of Pakistan, were duly finalized and agreement on the Mutual Memorandum of Understanding was also completed between the lawyers of the Commission and the buyers sources in the Commission said.

On Tuesday, the Commission forwarded to SBP the bio-data of the new private sector directors, namely: Prince Nawaf as Chairman, Dr. Sameer M.S. Basharahil, Ahmad Banakher and Asad Jamal as President and Chief Executive.

It had been agreed that a technical close would be completed on Wednesday and a formal agreement would be signed one week later in the presence of the proposed Chairman of the Board, Prince Nawaf bin Abdulaziz Al Saud at a ceremony with Prime Minister Benazir Bhutto. And only after a meeting of the new Board of Directors would a new management be inducted. But on Wednesday morning, the Government lawyers assured the Lahore High Court that they would not transfer shares to the Saudi buyers on April 11 and would file their reply on April 15, 1996.

A Karachi report adds: While the privatisation of UBL continues to get delayed from December 1995 to now April '96, the financial condition of the bank continues to weaken.

UBL at present stands in breach of Statutory Liquidity requirements. As against a 25 percent legal requirement - UBL is holding only 17 to 18 percent of approved government bonds. It does not hold enough securities to do a re-purchase agreement with other banks to borrow liquidity in a market which is hovering around six to seven percent.

In the meantime, UBL management has sought government permission to allow it to sell non-approved government securities such as Wapda bearer bonds etc to keep the bank ticking.

Other banks being cognizant of UBL condition are not prepared to lend on call. A legal wrangle delaying a decision to sell or scrap the privatisation deal could lead to horrendous consequences for the financial system of the country, independent experts feared.