Has the FIR sealed Hascol’s fate?
The company was pinning hopes on a restructuring deal with its lenders, but with the FIA dossier now out, would the banks dare pursue this deal any further? By Babar Nizami Be careful what you wish for, because you just might get it. And be careful from whom you apply for a loan, because you just might get it. If all goes well, no problem. But if it doesn’t, and a business cannot return its loan because it just can’t or because it never intended to, the great debtor-bank pantomime that will subsequently play out depends upon the nature of the bank more than the nature of the business. The banks exist on a spectrum, really. Three basic categories. The first is the government-owned banks like, most notably, the National Bank of Pakistan. Owned largely by the government, their work culture also unfortunately resembles sarkari sluggishness. These banks have by and large been known to not pursue default cases very aggressively, letting borrowers drag default cases upto seven to ten years. On the other extreme are banks like MCB, owned and run by their seths. The owners of these banks take default cases very personally, and are known to pursue the defaulters very aggressively, both legally and otherwise. Third: the approach of the executives of foreign owned banks or of the local ones run by ‘professional’ bankers lie somewhere in the middle. They seem to care about their bank’s money going bad more than the government owned banks, but probably only as much as it reflects badly on their personal performance. So, it’s simple, then? Even if a business concern isn’t a bad faith actor, they should just try borrowing from the government-owned banks to hedge against any risks in the worst case scenario. Well, not quite. After years of litigation and using the bank’s money, most business owners want to settle their loans. A settlement here means a discount from the bank on the principal amount owed to them. It’s (usually) bad faith borrowers who want settlements; banks could have simply seized the assets that had been kept as collateral at the time of the loan. Risk management policies of banks dictate that the collateral has to be a good twenty to thirty percent more than the
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