KARACHI: Pakistan is likely to sell 5-year US dollar-denominated Eurobonds of more than $2 billion in the next few days at 6 per cent to 6.5 per cent and 30-year tenor bonds at 8-9 per cent, said a Topline brokerage house report on Tuesday.

The settlement date for the issue is likely to be April 6, 2021. The analyst claimed that initial indications suggest that 5-year bond’s bids will be between 6.0-6.5 per cent and 10-year bond’s between 7.2-7.7 per cent. Interestingly, Pakistan is also trying to sell Eurobonds having a tenor of 30 years at a yield of close to 8.5-9.0 per cent.

Currently, Pakistan USD-denominated bond yields around 5.9 per cent (having maturity in 2027) in the secondary market. The average yield over the last three months for the same is around 5.8 per cent, the report added.

The analyst believed that re-entry of Pakistan in international capital markets will support investors’ sentiments. Regardless of the yield, the size of these bonds will provide much needed support to Pakistan foreign exchange reserves that are currently adequate for three months of imports.

S&P and Moody’s presently rate Pakistan as B with a stable outlook and B3 with a stable outlook. Recently Egypt having S&P rating of B and Moody’s rating of B2 (one notch above Pakistan), raised $3.75 bn. Egypt sold 5-year worth $750 m at 3.875 per cent, 10-year bonds worth $1.5 bn at 5.875 per cent and 40-year bonds worth $1.5 bn at 7.5 per cent.

Pakistan Rupee (PKR) vis-à-vis USD has climbed to a 22-month high, gaining around 3 per cent during the last month and 9 per cent from its bottom on Jul 20, 2020.

Pakistan floated its first bond in the international market in 1994 and then in 1997. The first bond was launched on Dec 22, 1994, at 11.5 per cent with the amount raised being $150 m. This was followed by $160 m and $300 m bonds in Feb-May, 1997 at 6 per cent and Libor + 395bps, respectively.

Later due to international restriction after nuclear tests, Pakistan was unable to tap the international market. However, Pakistan reverted back to the international market in 2004 as better macroeconomic indicators resulted in improved ratings.

In 2004-05, Pakistan issued a five year Eurobond and raised $500 m at a rate of 6.75 per cent. In 2005-06, Pakistan issued $600 m in five-year Sukuk issuance at a rental rate of 6 m LIBOR plus 220 basis points. In 2006-07, Pakistan issued a total of $800 m by issuing two Eurobonds worth $500 m (7.125 per cent, 10 year) and $300 m (7.875 per cent, 30 year) each.

Later, after gap of 7 years, Pakistan mobilized $2 bn in April 2014 by issuing 5 and 10-year bonds at 7.25 and 8.25 per cent, respectively.

In Nov-2014, Pakistan issued Sukuk of $1 bn (already matured in Dec-2019) at 6.75 per cent. In Sept-2015, Pakistan issued 5-year Eurobond of $500 m at 8.25 per cent. In Oct-2016, Pakistan issued 5 year Sukuk of $1 bn at the lowest rate of 5.5 per cent.

In the last issue of Nov-2017, Pakistan raised $2.5 bn by offering a five year Sukuk of $1 bn and a 10-year Eurobond of $1.5 bn at 5.625 and 6.875 per cent, respectively.


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