By Muhammad Luqman
Pakistan has successfully executed US$ 1.0 billion five years Sukuk and US$ 1.5 billion ten years Eurobond transactions at a profit rate of 5.625% and 6.875% respectively.
“ The order book for Pakistan’s sovereign papers was over US$ 8 billion. However, the Government decided to pick up only US$ 2.5 billion to ensure low final yields on the Sukuks and Eurobonds,” Pakistan’s Ministry of Finance announced early Thursday.
It is worth mentioning that 6.875% rate for 10 year Eurobond issuance is the lowest ever rate, as no 10- year bond has ever been sold at a cheaper rate by Pakistan in international capital markets. Furthermore, Pakistan has never executed multiple tranche transactions worth US$ 2.5 billion, simultaneously.
The orders were placed by numerous blue chip institutional international investors from all across the globe. About 44% of the orders were placed by investors from Europe, 24% from Asia, 20% from North America, 8% Middle East and 12% from other regions, a spokesman of the Finance Ministry said.
The process of issuance of Sukuk and Eurobond included roadshows in Dubai, London, Boston and New York by a team comprising Mr. Miftah Ismail Special Assistant to the Prime Minister on Economic Affairs, Mr. Shahid Mahmood Finance Secretary and Mr. Tariq Bajwa Governor State Bank of Pakistan. The team held meetings with over 100 potential institutional investors in these major financial centres. The Pakistani delegation consistently remained in contact with the Prime Minister who also accorded the final approval for the transactions.
During the roadshows, the investors expressed keen interest in Pakistan and its economy, which is evident by a total bookbuilding of over US$ 8.3 billion. They were particularly appreciative of the remarkable economic turnaround and high growth rate achieved as a result of economic reforms undertaken by the government. The roadshows ended on 28th November, 2017 and bookbuilding process closed on 29th November, 2017.
The “Subscription Agreement” with Joint Lead Managers provides that the certificates or interests therein will not be offered, sold or transferred directly or indirectly in Pakistan, to residents of Pakistan, or to, or for the account or benefit of, such persons. The issuance of Sukuk and Euro Bond will increase the country’s forex reserves without increasing overall public debt as there will be a corresponding reduction in domestic debt.
Such oversubscription and overwhelming response of global investors to the said sovereign issuance is an evidence of the trust and confidence of international capital markets in the economic policies of the Government and the impressive economic turnaround story of Pakistan, the spokesman said.
By Muhammad Luqman