Govt Has No Money so Equity Swaps only Option to Settle Pending Dues

Pakistan State Oil (PSO) is exploring equity swaps as a solution to settle its substantial pending dues, given the government’s current lack of available funds. An equity swap involves exchanging future cash flows between two parties, enabling one party to receive returns from an equity index while paying a fixed or floating interest rate to the other party.

This approach mirrors other instances where companies have converted debt into equity to manage financial challenges. For example, Vodafone Idea recently converted over Rs 16,133 crore of its dues into equity, resulting in the government acquiring a 33.14% stake in the company. Such measures allow companies to alleviate immediate cash burdens by offering stakeholders equity stakes instead of cash payments, thus stabilizing their financial position and ensuring continued operations.

PSO’s decision reflects a strategic move to manage its debt more sustainably, similar to practices seen in global markets where debt restructuring through equity swaps is a common strategy during financial distress.

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