Pakistan raises $2.5b through Sukuk, Eurobond in largest-ever transaction

03:48 PM | 30 Nov, 2017
Pakistan raises $2.5b through Sukuk, Eurobond in largest-ever transaction
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ISLAMABAD - In a largest-ever transaction, Pakistan on Wednesday raised $2.5 billion from global capital markets by issuing the five-year Sukuk (Islamic bond) and the 10-year Eurobond.

The bonds were issued at relatively lower rates which is a harbinger of the fact that foreign investors are still confident about the country’s economy wading through crisis.

The dollar-denominated Eurobond and Sukuk Al-Ijarah fetched the highest-ever amount $2.5 billion for Pakistan in a single such offshore attempt.

Though the country is not having a full-time finance minister due to illness and legal battle of Ishaq Dar, even then Pakistan got a better price and a better deal size apparently due to excessive liquidity in the international market and low-interest environment.

The pumping of $2.5 billion would provide succour to the government which is reluctant to consult International Monetary Fund (IMF) ahead of the next general elections.

Earlier, Pakistan fetched around $8 billion offers for both Sukuk and Eurobond, allowing the country to get the best deal.

The deal was signed off at rates which were even lower than indicative rates Pakistan offered to global investors.

Statistically, Pakistan offered the 10-year Eurobond bond in the low 7% range and the 5-year Sukuk at an initial price tag of 6%.

The government raised $1 billion through the 5-year Sukuk at the rate of 5.625%, which near lowest-ever rate of 5.5% that Pakistan paid in September last year.

The rest of $1.5 billion were generated through the 10-year Eurobond at a fixed rate of 6.875%, which is 455 basis points above the corresponding 10-year US Treasury benchmark rate, matching the lowest-ever rate of 6.875% that Pakistan paid in 2007 on its 10-year Eurobond, Express Tribune reported.

The Third Pakistan International Sukuk Company issued the Sukuk Al-Ijarah, pledging a section of Pakistan Motorways as collateral.

Both the bonds will be listed on the Luxembourg Stock Exchange under the US Regulations.

The deal came as a team comprising Special Assistant to the Prime Minister on Economic Affairs Dr Miftah Ismail, Secretary Finance Shahid Mahmood and the Governor State Bank of Pakistan (SBP) held road shows in the UAE, the UK and the US.

 

In order to meet forex requirements, the PML-N government has so far raised a staggering $13.7 billion by floating bonds and obtaining commercial loans over the past four and a half years. These include $6.64 billion expensive foreign commercial loans and $7 billion Sukuk and Eurobond notes, including the fresh deal.

Asad Umar- Miftah Ismail Twitter Debate

Soon after Special Assistant to the Prime Minister on Economic Affairs, Dr Miftah Ismail announced the deal, Pakistan Tehreek-e-Insaf's central leader claimed that the government paid a double premium as compared to 2007.

Asad claimed that the bond believed to have been issued at lowest ever price was 4.5% above US treasuries.

In another tweet, Asad, however, termed the decision right, though taunted that the rate at which current account deficit stood could make it impossible for the country to strike such deal in future.

The PTI leader stressed the need for taking steps in the positive direction to revive the economy.