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November 26, 2020

‘Advisers for Eurobond, sukuk soon to be hired’

Business

November 26, 2020

KARACHI: The government is expected to hire advisers to issue dollar-denominated bonds in the international market by this or early next week, finance ministry’s spokesperson said on Wednesday.

Kamran Afzal, the ministry’s spokesperson told The News that the government is working out and evaluating the technical and financial bids submitted by the interested financial institutions to structure the bonds.

“We will complete the process and select the advisers by the end of this or early next week,” said Afzal.

The government plans to raise around $1 billion through the issuance of Eurobonds possibly in December or January. “We can go up depending on the response from the international market,” he said.

Sources close to the matter said six global lenders have been qualified for the technical bids. These include JP Morgan, Deutsche Bank, Dubai Islamic Bank, Citi Bank, Credit Suisse and Standard Chartered Bank. However, the list of the successful financial bidders have not been finalised by the finance ministry as yet.

The government wants to hire two consortiums, consisting of five financial institutions for Eurobonds and four for sukuk. The selected consortiums will help the government structure the bonds, while managing, coordinating and executing the whole range of activities associated with the issuances.

The appointment of the two consortiums has to take place through an open competitive process.

The potential Eurobond and sukuk will be the present government’s first debt sales to raise funds to bridge the balance of payments gap for the current fiscal year.

Pakistan had raised $1 billion in five-year sukuk and $1.5 billion in 10-year Eurobonds in 2017. Profit rate for sukuk was 5.625 percent and for the Eurobond it was 6.875 percent.

The government aims to set up medium term note programs for the issuance of Eurobonds and sukuk in international capital markets. This program is initially to cover a period of one year.

Analysts said some countries are planning comeback to foreign debt market with dollar-denominated bond despite the second wave of the coronavirus pandemic.

If Pakistan resumes an International Monetary Fund program, suspended in earlier this year, then investors’ interest in Pakistan bonds will be higher, according to an analyst.

“Pakistan has a great track record in honoring sukuks and Eurobonds of the past,” said Muzzammil Aslam, CEO at Tangent Capital Advisors. “With the IMF program and better outlook Pakistan will manage to pull investors interest. Moreover, given the depressed global yields, investors’ appetite for Pakistan Sovereign issues will be unavoidable.”