LAHORE, July 14: Four industries owned by the family of former prime minister Nawaz Sharif and surrendered by them in 1998 to the creditor banks against a loan of about Rs3 billion have been purchased by a Faisalabad group for Rs2.15 billion.

The deal was finalized on July 7 by a three-member committee appointed by the Lahore High Court about six years ago to dispose of the Sharif assets for adjustment of bank loans.

Nawaz Sharif as prime minister had surrendered the four units - Ittefaq Foundries and Brother Steel Mills at Kot Lakhpat, Ittefaq Brothers at Shahdara and Ilyas Enterprises at Bund Road - to the banks, asking them to sell these industrial units and make adjustments of their outstanding loan liabilities.

Eight banks had advanced a collective loan of Rs3.11 billion to the Ittefaq Group of Industries between 1982 and 1998. In most cases the loan was not paid back and the banks added the markup charges to the actual credit.

According to a report in October 1998, the total value of these units was around Rs1.835 billion. The Sharifs, while surrendering the industrial units, had also offered that the creditor banks could also take possession of the entire "receivables" of the units, said to be worth about Rs1 billion.

The receivables were in the form of amounts outstanding against different sugar mills which had purchased sugar plants and other equipment which these four steel fabricating units had sold. About 50 per cent of the amount was outstanding against the Sharifs' own sugar mills.

The evaluation of assets was made by a Karachi-based firm and it said in its report on October 6, 1998, that they put the value at Rs1.795 billion. The National Bank of Pakistan also had a separate valuation carried out when the value was estimated at Rs1.948 billion.

Land, machinery, civil works and steel structures were mainly the basis for the assessments. It took the three-member committee about six years to dispose of the Sharifs' industries for the adjustment of bank loans.

NBP had advanced about 50 per cent of the total loan. The remaining half was given by Habib Bank, United Bank, Muslim Commercial Bank, Bank of Punjab, the Agricultural Development Bank, Punjab Modarba, ICP and PICIC.

The three-member committee, comprising advocate Iqbal Hameeduddin, Kamran Amin of the NBP and chartered accountant Abdul Qadeer Khawaja, submitted to the Lahore High Court its 20th and final report on July 7, which stated that the Al-Rehmat Group of Companies of Faisalabad, by offering the best price in pursuance of an advertisement in the press, had shown willingness to purchase the four units for Rs2.15 billion.

The group has already deposited an amount of Rs200 million as part of the agreement. The group, primarily an exporter of textile products, has also agreed to deposit the remaining amount within 15 months.

According to the report, some other parties also approached the committee and the NBP to purchase the assets, including Mian Ilyas Meraj, a cousin of Mr Nawaz Sharif, who made an offer of for Rs850 million. The offers were rejected.

After the offer of the Al-Rehmat Group of Companies was unanimously accepted by all the creditor banks on July 7, the final report, which bears the signatures of all the representatives of the banks, was submitted to the Lahore High Court.

Justice Syed Zahid Husain is to give formal approval of the transaction under a court order which binds the parties to get all transactions approved. As for the receivables of around Rs1 billion, the committee has not been able to get any money on this account.

The Sharifs, who had reportedly pledged to pay 50 per cent of the amount outstanding against their sugar mills immediately and taken the responsibility of clearing all other outstanding bills on receivables account, have not paid anything so far.

During the six-year period, the committee submitted reports to the LHC regularly. One such report in early 1999 said that the management of the Ittefaq Foundries continued to sell its stock but with intimation to the committee.

However, the entire sale proceeds amounting to Rs507 million were used by the company and were not deposited in the committee account which it was supposed to do.

After October 1999, the committee took over physical possession of the factories and appointed additional security guards. Ittefaq Foundries enjoyed a credit facility of Rs17.5 million when it opened an account with the National Bank of Pakistan's Wapda House branch in Lahore in August 1979.

Soon after Mian Nawaz Sharif was appointed as finance minister of Punjab by Gen Ziaul Haq, this credit facility went up to Rs30 million. When Mian Nawaz Sharif became provincial chief minister, the credit jumped to Rs200 million.

The company did not pay any markup up to 1988-89, but their credit facility was once again increased to Rs288.177 million. For this the Ittefaq Foundry's assets were mortgaged to the bank on November 12, 1991, showing its value at Rs359.88 million. The company continued to default in payment of markup and credit instalments for another three years.

As a result, the credit value mounted to Rs574.673 million. In June 1993, the company opened a letter of credit for Rs310 million for a period of 180 days. The credit was availed for the import of shredded steel scrap from the US. Only five per cent of the LC value was paid.