Finance Minister Senator Mohammad Ishaq Dar in a statement expressed satisfaction that Pakistan successfully issued US$ 1 billion sukuk late last night at a historic low rate of 5.5% 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 was almost five times oversubscribed with orders of approximately US$ 2.4 billion received as against the initial offering of US$ 500 million. 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% of the orders were placed by investors from Europe, 27% from North America, 27% from Middle East and North Africa, 6% from Asia and 2% 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 Center for International Development at the prestigious Harvard University has predicted that Pakistan’s GDP will grow by 5.07% 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 4.7% to 5.2% and 5% respectively.
The road shows ended on 4th October 2016 and book building process closed on 5th October 2016 after which allocation and pricing exercise took place which was participated in by Finance Minister Senator Mohammad Ishaq Dar through a series of video conferences and conference calls. These video and audio conferences were participated in by 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 5.75% while issuing price and other guidelines on the evening of 4th October 2016.After book building reached US$ 2.4 billion approximately on 5th October night, the final pricing was officially downwards revised to 5.5% 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 US$ 1 billion.
It is important to note that 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 Rs 104.5 billion and will, therefore, not result in any increase in the country’s overall public debt.
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