According to informed sources, five pre-qualified bidders, namely, Pak Kuwait Investment Co, Askari Bank/Army Welfare Trust, Jahangir Siddiqui Investment Bank, NIB/Tomasic (Singapore) and Ibrahim Leasing/Ibrahim Fibre Group, have already submitted the funding plans and propounded the details of their management expertise to the State Bank of Pakistan.
The top two bidders will be eligible to participate in the auction process and improve their initial offers.
Following a successful buyout, the new owners would have 90 days period to take over the bank's management. The auction has been set in Islamabad to speed up the approval by the Cabinet Committee on Privatisation the very next day, sources said.
The buyer would have to inject capital to raise ABL's equity under a restructuring plan approved up by the State Bank of Pakistan. This implies that the funds from the buyer will be wholly injected into the bank itself to bridge the loss provisioning gap and nothing will go to the government for its shareholding in ABL.
The Privatisation Commission, after failing to sell government stake in ABL, gave the mandate to SBP, three years ago, to undertake the task as regulator of the banking system.
ABL, which was privatised in 1991 when its employees bought the strategic stake at Rs 72 per share from the government, plunged into trouble in the late 1990s on account of bad loans and mismanagement.
The bad loans in excess of Rs 6 billion have wiped out a large part of the bank's equity, which now stands at Rs 1 billion, sources said.
For these reasons, the bank, which has a network of 825 branches and over 7,000 employees, has not been able to make public its balance sheet for the past three years.
The State Bank under Section 53 of the Banking Act has taken over the management after removing the board of directors and appointed Khalid Sherwani, a former executive, as ABL's president to reform the bank.
While operational profitability of the bank has been restored, it is the old losses which need to be covered by the owners as per law.
The employees of the bank who own 51 percent of the shares, have started selling their stakes to three groups in the country.
The Fateh Group of Hyderabad (Gohar Family) accumulated shares estimated at 12 percent. In an inspection carried out by SBP, it was found that the export refinance availed by them was used to purchase of these shares.
The largest chunk of 22 percent was bought from the employees by Sikandar Jatoi of Sardar D. Baluch and Company, and 8 percent reportedly by Mehtab Abbasi of Daily Ausaf Islamabad.
Under the banking companies ordinance purchases of more than 5 percent stake by an individual/business concern has to be reported to the SBP for its approval. Since none of the three parties had intimated their plan to secure more than five percent shares of ABL, SBP as the regulator blocked transfer of these shares to them.
Litigation on the matter has been pending in the Lahore High Court and the Sindh High Court. Stay orders were obtained to block further sale ABL's share from the court by two of the three buyers.
However, the National Accountability Bureau, on a complaint intervened and blocked the transfer of shares of the Fateh Group and as this Hyderabad based group had defaulted by a few billion rupees on an ABL loan, the bank's management successfully obtained a decree to sell these shares.
Last year SBP invited financial institutions to bid for ABL management stakes under a restructuring plan which envisages amalgamation of the buying institution with ABL.
The offer was restricted to banks, DFIs and leasing companies only. Around eleven institutions showed interest but only five managed to get past the pre-bid approval stage.
A data room was established in the bank and due diligence was undertaken by the five aspirants and all queries were duly answered by the financial consultants to the sale issue (ABN Amro) and ABL's management.
After having the stay orders vacated in Lahore and Sindh High Court, SBP held a pre-bid meeting and invited the five buyers to provide their funding plan.
While the process was under way a Lahore based group, led by Iqbal Z. Ahmed, with the backing of ABL employees union and officers association, emerged on the scene with the contention that they were buying shares from the three groups holding the employees' share, whose transfer has been blocked by SBP.
The NAB certified that Iqbal group had settled all its overdue liabilities with the banks and could buy the ABL shares subject to SBP approval.
A memorandum of understanding was submitted to SBP by the group in which it offered to buy these shares at Rs 24 per share.
SBP asked the party to provide the funding plan and it was also made clear to them that they could not enter the bidding process which was in an advanced stage and restricted to financial institutions.
It is believed that the Iqbal group could not satisfy the SBP about their ability to purchase these shares on basis their wealth statement certified by the Central Board of Revenue.
Sikandar Jatoi had sold off 4 percent shares to Habib Bank under the SBP directive during the Nawaz Sharif era to enable the government shareholding to increase to 53 percent and obtain a majority (government stakes were only 49 percent, at that time).
Cumulatively now the three groups having bought from the employees have 38 percent shares and under the restructuring plan which envisages a right issue, their shareholding would be reduced to below 10 percent as capital of the bank is fully restructured. Knowledgeable sources expects the local groups to bid aggressively as this is last big bank earmarked for privatisation.
Experts expect that a bid of Rs 38/Rs 40 per share ie Rs 10 billion to Rs 12 billion, may ultimately clinch the auction on Friday.