ISLAMABAD: Pakistan’s dollar-denominated Eurobonds have been oversubscribed almost two times after receiving raving response to attractive interest rates from foreign investors, analysts said on Tuesday.
Analysts are expecting the country to raise $2 to $2.5 billion through conventional bonds with tenors of five, 10 and 30 years.
Price guidance was 6 percent for five-year, 7.375 percent for 10-year and 8.875 percent for 30-year bonds with combined books of $5.3 billion, said Karachi-based Topline Research CEO Mohmmad Sohail who expected more than $2 billion from the issuance in next few days. The settlement date for the issue is likely to be April 8, 2021.
The 5- and 10-year pricing is likely to be straight forward given the existing bonds offer a good benchmark and even a pricing of 5.625 to 5.75 percent for new 5-year bond would be a significant pickup from similarly rated sovereigns, including Egypt, Kenya and Nigeria, according to Mohammad Ahsan, managing director of rates and fixed income at Mashreq Bank in Dubai.
“It’s the 30-year tranche which presents some challenges in terms of appropriate issue size and reoffer yield,” Ahsan wrote in a LinkedIn post.
Currently, Pakistan dollar-denominated bond with maturity in 2027 yields around 5.9 percent in the secondary market. The average yield over the last 3-month for the same is around 5.8 percent, Topline Research said.
“We believe this re-entry of Pakistan in international capital markets will support investor sentiments. Regardless of the yield, the size of these bonds will provide much-needed support to Pakistan’s foreign exchange reserves that are currently adequate for 3 months of imports,” Topline Research said in flash note
Recently, Egypt having Standard and Poor’s rating of B and Moody’s rating of B2 – one notch above Pakistan – raised $3.75 billion. Egypt sold 5-year worth $750 million at 3.875 percent, 10-year bonds worth $1.5 billion at 5.875 percent and 40-year bonds worth $1.5 billion at 7.5 percent.
In last issue of November 2017, Pakistan raised $2.5 billion by offering 5-year sukuk of $1 billion and 10-year Eurobond of $1.5 billion at 5.625 percent and 6.875 percent, respectively.
The country floated its first bond in international market during 1994 and then in 1997. The first bond was launched on Dec 22, 1994 at 11.5 percent with $150 million raised, according to Topline Research. This was followed by $160 million and $300 million bond in February-May 1997 at 6 percent and London inter-bank offered rate (Libor) plus 395 basis points, respectively.
Later due to international restriction after nuclear testing, Pakistan was unable to tap international market. However, it returned to international market in 2004 as better macroeconomic indicators resulted in improved ratings.
In FY2005, the country issued 5-year Eurobond and raised $500 million at rate of 6.75 percent. In FY2006, it issued $600 million in 5-year sukuk issuance at rental rate of six-month Libor plus 220 basis points. In FY2007, the country issued 10-year Eurobonds of $500 million at 7.125 percent and 30-year Eurobonds of $300 million at 7.875 percent.
Later, after gap of 7 years, it mobilised $2 billion in April 2014 by issuing 5- and 10-year bonds at 7.25 percent and 8.25 percent, respectively. In November 2014, sukuk issue fetched the country $1 billion at 6.75 percent – the bond matured in December 2019. In September 2015, Pakistan issued 5-year Eurobond of $500 million at 8.25 percent. In October 2016, it issued 5-year sukuk of $1 billion at a lowest rate of 5.5 percent.
