No litigation, no write-offs!

Recent news reports have highlighted that Azgard Nine, the holding company which owns Agritech, intends to list the latter on the domestic bourses.
In the back ground of this development, the holding company and its lenders have successfully negotiated what may be considered the largest out-of-court debt settlement in Pakistan’s corporate history.
Earlier, a currency swap agreement entered into by the company turned sour when the rupee devalued rapidly against the US Dollar dropping from an exchange rate from around Rs60 per dollar, to over Rs90 per dollar.
As a result of the wild gyrations and rapid depreciation in the local currency versus the US green back, the combined debt of the two companies mushroomed to around Rs40 billion.
While the company was in hot water due to the spiraling debt, 42 institutions that had lent to Agritech and its holding company were also in a fix. Twelve banks formed the consortium to purchase 75 percent of Agritech at around Rs35 per share, thereby, reducing the debt of Azgard Nine to Rs8 billion and Agritech debt to around Rs18 billion.
Fauji Foundation had expressed interest in taking over management of the company, but later back tracked given their inclination to diversify away from the fertilizer business.
Under the recently reached agreement, a consortium of 12 leading banks, headed by the National Bank of Pakistan shall take over 75 percent ownership of Agritech, freeing up Azgard Nine from the entity.
Although Engro Corporation had earlier signed a memorandum of understanding to supervise Agritech earlier, under the new agreement technical assistance to the stand-alone company will be provided by Arif Habib Group, including its company Fatima Fertilizers.
While details of the deal continue to seep through, the significance of the arrangement reached is remarkable and noteworthy. On this occasion, no less than 42 financial institutions, funds and investors have successfully reached an amicable resolution and avoided both costly litigation and wasteful write-offs.
The health of the holding company, in this case Azgard Nine will receive a boost while the de-merged entity will hopefully emerge with new management and re-invigorated vision for a public listing that may allow it to shore up capital for a more balanced, balance sheet.