Ministry of investment continues drive to lower public company debt to LE 10 billion
CAIRO: Minister of Investment Mahmoud Moheiddin said Wednesday the government has paid off LE 1.16 billion, representing the debts of six subsidiaries of the Holding Company for Trade.
The largest beneficiaries of the debt settlement included Al Nasr for Import and Export with LE 646 million, and household goods retailers Sednawy and Banzion with LE 100 million and LE 180 million, respectively. According to a Ministry of Investment (MOI) statement, some of the debts had been accumulated since the early 1990s.
Although the restructuring aims to prepare the companies for privatization, a senior MOI official told The Daily Star Egypt no decisions have been made yet regarding the privatization of any of the beneficiary companies. MOI denied earlier this week news reports of its issuance of a list of 100 companies to be privatized in 2007, adding the decisions are made as each company is prepared individually.
HCT Chairman Hadi Fahmy was not available for comment on the possibility of putting up Sednawy and Banzion for sale this year. Still, during the troubled sale of Omar Effendi, Fahmy said HCT was preparing all its public goods retailers for privatization, though he did not set a timeframe.
MOI is now in the second phase of public company debt settlement after completing a LE 6.9 billion first phase, covering 46 companies. The ongoing settlement of LE 9.2 billion is being financed entirely from the proceeds of the October sale of the Bank of Alexandria (BOA), according to MOI.
Public company debt had reached LE 31.5 billion in June, 2004, of which LE 28.5 billion were owed to public banks. Despite the progress made on debt settlement, MOI has come under strong public criticism for not allocating BOA privatization proceeds to infrastructure projects in health, housing and transportation as was done with the LE 16.7 billion sale of the third mobile operators license.
When you lift the debt burden off of a company, you give it more room to breathe, the MOI official said. A lot of the companies that have had their loans repaid are now recording positive bottom lines because interest alone was putting them in the red year after year. Settling these companies debts is a huge part of restructuring program, whether or not they are put up for sale.
The LE 9.2 billion now being paid off to public banks, combined with the steady installments paid by some companies is expected to bring public company debt down to about LE 10 billion, of which LE 7.8 billion are owed to public banks.