Sukuk Bonds Auction after OGDCL

Society Pakistan & World Affairs
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**Govt should complete all these transactions on a fast track …

Reserves hovering around $13.6 bn …**

Sukuk bonds auction after OGDCL privatisation

October 12, 2014
IMRAN ALI KUNDI

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ISLAMABAD - The government would initiate the process of auctioning of Sukuk bonds to generate one billion dollars after completing the privatisation of ten percent shares of Oil and Gas Development Company Limited (OGDCL), it was learnt on Saturday.

The government had faced delay in completing two transactions including disinvestments of OGDCL shares and auction of Sukuk bonds due to the sit-ins of Pakistan Tehreek-I-Insaf (PTI) and Pakistan Awami Tehreek (PAT) in federal capital. Sources hinted at the negative impact of uncalled for domestic turbulence impacting the government’s efforts for revival of the economy especially delay in the launch of the Islamic Sukuk bonds, which would have helped the build up targeted reserves of $15 billion.

However, the government has now decided to expedite the process of OGDCL’s shares disinvestments, as country is holding international market road shows in international cities. The privatisation of OGDCL shares in subjected to the decision of Supreme Court of Pakistan.

The Supreme Court on Friday allowed the federal government to proceed with the sale of OGDCL shares after overturning a Peshawar High Court (PHC) stay against the decision to sell off the government’s shares in the company. The apex court asked the government to accept the bids, but not to transfer the shares until the court’s final decision in the matter comes. After OGDCL’s shares privatisation, the government would initiate the process of Sukuk bonds.

“The government will start the process of auctioning of Sukuk bonds after completing the ongoing disinvestments process of ten percent shares of the OGDCL”, said Rana Asad Amin, spokesperson and Advisor to the Finance Ministry while talking to The Nation the other day. He added that government has planned to generate one billion dollars through the Sukuk bonds.

It is worth mentioning here that country was deprived of adding $2.4 billion in foreign exchange reserves due to the sit-ins of the PTI and PAT. The government had estimated to generate one billion dollars from Sukuk bonds, $850 million from OGDCL privatization and $550 million from the International Monetary Fund (IMF) as fifth tranche under extended fund facility.

The two transactions including disinvestments of OGDCL shares and auction of Sukuk bonds would help in building the country’s foreign exchange reserves. According to the State Bank of Pakistan, the country’s foreign exchange reserves are $13.4 billion wherein central bank reserves are $8.86 billion and other banks (commercial banks) are $4.54 billion.

Pakistan in previous financial year 2013-2014 had successfully raised $2 billion from global capital markets through the issue of five- and 10-year Eurobonds. The government has raised $1 billion through five-year bonds at a fixed rate of 7.25 percent and $1 billion was generated through 10-year bonds at a fixed rate of 8.25 percent.

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Re: Sukuk Bonds Auction after OGDCL

Pakistan set to conclude $1bn Sukuk transaction on 26th

Mehtab HaiderSunday, November 23, 2014

**ISLAMABAD: Pakistan, eyeing to raise up to $1 billion by issuing dollar-dominated sukuk, will conclude the transaction on the evening of November 26 in a bid to build up its much-needed foreign currency reserves, government officials said on Saturday.
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“We hope to conclude Sukuk bond on evening of 26th November,” Federal Minister for Finance Ishaq Dar told The News.

Pakistan’s foreign currency reserves stood at $13.228 billion including $8.493 billion held by State Bank of Pakistan and $4.734 billion held by commercial banks.

Finance Minister Dar had envisaged target to touch $15 billion mark on account of foreign currency reserves till December 31, 2014 which would enable Islamabad to qualify for IBRD funding of the World Bank.

Sources in the Finance Ministry said the country would offer $500 million of Islamic notes and the exact size of the bond would depend upon offers which expected to be over $1 billion. Keeping in view rampant liquidity for Islamic paper in debt market, Pakistani authorities are expecting that the country will be able to muster up required support for its upcoming transaction with the help of investors belonging to Middle East and western part of the world.

But the independent economists are suggesting the government to stick on its planned worth of $500 million in order to remain on the radar screen of investors and there was no need to prove the country as desperate borrower by seeking more funds.

For this asset-based Islamic paper, Pakistan’s economic managers will kick-start three road shows from Monday to November 25 in Dubai, Singapore and London. Federal Finance Minister Ishaq Dar, Secretary Finance and Governor State Bank of Pakistan will participate in these arranged road shows to lure potential investors.

Islamabad had selected Citigroup, Deutsche Bank, Dubai Islamic Bank and Standard Chartered as lead managers for this transaction and would be responsible to hold road shows and luring investors towards planned paper.

The country is likely to attract investor interest because of high appetite for Sukuk all around the world and that would also support the demand for Pakistan’s offering. The country has no outstanding global Sukuk.

The government has yet to announce the size and maturity for Sukuk, but the market predicts a 10-year Sukuk would probably yield from 7.25 to 7.5, while a five-year note will pay from six percent to 6.5 percent.

After successful completion of fourth and fifth reviews at the IMF staff level, the Fund’s executive board is scheduled to consider approval of $1.1 billion for Pakistan’s struggling economy on December 17 in Washington D.C which would help Islamabad increasing its foreign currency reserves to touch the desired mark of $15 billion by end of this calendar year.

Pakistan had launched Eurobond in April last which was oversubscribed by investors and the country generated $2 billion against its initial demand of $500 million.

Through Eurobond, the government had raised $1 billion through five-year bonds at a fixed rate of 7.25 percent, which are 558 basis points above the benchmark five-year US Treasury rate. The rest of the $1 billion was generated through 10-year bonds at a fixed rate of 8.25 percent — 556 basis points above the corresponding 10-year US Treasury benchmark rate.