KARACHI: The Asian Development Bank (ADB) will float rupee-linked bonds worth $200 million for Pakistan to support its external account position, the bank said on Wednesday.
“ADB will issue bonds denominated in Pakistani rupee up to a value of $200 million equivalent to support local currency operations and develop capital markets,” ADB said in a tweet. “Pakistan approved ADB’s issuance of Pakistani rupee-linked bonds.”
Last month, the Economic Coordination Committee (ECC) of the cabinet approved floating of rupee-linked bonds in the international markets. ECC allowed the ADB to issue offshore rupee-linked bonds for international investors subject to completion of all codal formalities.
“The program, according to the recommendation of SBP (State Bank of Pakistan), shall be restricted to maximum of $200 million,” finance ministry said in a statement then. “The local currency proceeds of the bonds shall be used for financing long term infrastructure and energy projects in Pakistan.”
Fitch Solutions forecast rupee to average 171.15 versus the US dollar next year as soft demand for Pakistani assets by foreign investors will continue to cool demand for the local currency. Fitch Solutions estimated rupee weakened around 7.1 percent against the US dollar till last month.
ADB returned to the US dollar bond market with the pricing of a $3 billion 5-year global bond, proceeds of which will be part of ADB’s ordinary capital resources.
“We looked at the post-summer issuance window and saw an opportunity to add a new 5-year to our global benchmark curve,” ADB Treasurer Pierre Van Peteghem said in a statement. “With most of the immediate action in the dollar market situated around the long end, we felt that the mid part of the curve was relatively undersupplied and decided to capitalize on pent-up demand. The result was a strong one with an oversubscribed orderbook for a $3 billion benchmark print that will provide much-needed resources to support ADB’s increased assistance to its regional members in 2020.”
The 5-year bond, with a coupon rate of 0.375 percent per annum payable semi-annually and a maturity date of 3 September 2025, was priced at 99.556 percent to yield 15.4 basis points over the 0.25 percent US Treasury notes due July 2025.
The transaction was lead-managed by Bank of America, Credit Agricole CIB, Citi, and J.P. Morgan. A syndicate group was also formed consisting of ANZ, BNP Paribas, DBS Bank Ltd., NATIXIS, and Rabobank.
The issue achieved wide primary market distribution with 41 percent of the bonds placed in Asia; 34 percent in Europe, Middle East, and Africa; and 25 percent in the Americas. By investor type, 52 percent of the bonds went to central banks and official institutions, 31 percent to banks, and 17 percent to fund managers and other types of investors.
