Pak issues $1b Sukuk at historic low rate of 5.5pc

ISLAMABAD: Pakistan has successfully issued $1 billion Sukuk at a historic low rate of 5.5 per cent which is better than recent sovereign issuance of bonds by both Bahrain and Sri Lanka, the credit ratings of which are higher than Pakistan.
Pakistan Sukuk is almost five times oversubscribed with orders of approximately $ 2.4b received as against the initial offering of $500m. The issuance of Sukuk will equally reduce the domestic public debt by around Rs104.5b and will, therefore, not result in any increase in the country’s overall public debt.
In this regard, Finance Minister Senator Mohammad Ishaq Dar stated that the orders were placed by over 100 blue chip institutional international investors including investment advisers, asset managers, banks and trusts mutual funds, pension funds and hedge funds for all across the globe. 38 per cent of the orders were placed by investors from Europe, 27pc from North America, 27pc from Middle East and North Africa, 6 pc from Asia and 2pc from other regions.
The process of issuance of Sukuk included conduct of roadshows in Dubai, London, Boston and New York by a team comprising Finance Secretary and Governor State Bank of Pakistan. The team held meetings with over 100 potential institutional investors in these major financial centres in close coordination with the Joint Lead Managers (JLMs) comprising Standard Chartered Bank, Citibank, Deutsche Bank, Dubai Islamic Bank and Noor Bank.
During the roadshows, the investors showed unprecedented interest in Pakistan and its economy. They were particularly appreciative of the remarkable turnaround in Pakistan’s economy as a result of comprehensive and far-reaching reforms undertaken by the government.
As a result of those reforms, the Centre for International Development at the prestigious Harvard University has predicted that Pakistan’s GDP will grow by 5.07pc over next 10 years. At the same time, the Asian Development Bank, the World Bank / IMF have also recently revised upward their growth forecasts for Pakistan from 4.7pc to 5.2pc and 5pc respectively.
The roadshows ended on 4th October 2016 and the book-building process closed on 5th October 2016 after which allocation and pricing exercise took place in which Finance Minister Senator Mohammad Ishaq Dar participated through a series of video conferences and conference calls.
The participants in the conference were the officials of Ministry of Finance, representatives of the Joint Lead Managers as well as the Syndicate based in London. Finance Minister indicated that the initial pricing was 5.75pc while issuing price and other guidelines on the evening of 4th October 2016.
After book-building reached $2.4 billion approximately on 5th October night, the final pricing was officially downwards revised to 5.5pc and the transaction was completed within next few hours. Final allocation on the JLMs recommendation was confirmed to around 90 institutional investors with a total value of $1b. 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.
Finance Minister also stated that the issuance of Sukuk will equally reduce the domestic public debt by around Rs104.5b and will, therefore, not result in any increase in the country’s overall public debt. Staff Reporter