Pakistan floats bonds worth $1bn in international market

July 7, 2021 (MLN): The government on Tuesday sold different tenors bonds worth $1bn in the international market, after raising $2.5 billion in March through Eurobonds which was Pakistan'ss first international bond sale since late 2017.

According to Reuters, Pakistan sold $300 million of a tranche due in 2026 at 5.875%; $400 million in bonds maturing in 2031 at 7.125%; and $300 million in paper due in 2051 at 8.45%.

The bonds were tightened from initial price guidance of 6%-6.125% for the notes due in 2026, around 7.375% for the tranche maturing in 2031, and around 8.75% for the paper due in 2051 after they drew more than $3 billion in combined orders.

It was Pakistan’s second bond sale of the year, after raising $2.5 billion in March through Eurobonds. However, the interest rates were slightly lower than the previous transaction.

The March transaction had attracted $5.3 billion in orders and was 2.1 times oversubscribed.

The government received over $3 billion worth of bids from foreign investors out of which it accepted $1 billion offers.

The Eurobonds interest rates were significantly lower when compared with the 7% cost that the government is paying on one-year short-term borrowings through Roshan Digital Accounts.

Pakistan was able to cut its cost of funding by 12.5 basis points (bps), 25 bps, and 30 bps for each respective tranche of the "tap" - when an existing transaction is reopened for subscription, using the same documentation as before, Reuters quoted.

The March transaction's five-year tranche launched at 6%, the 10-year paper at 7.375% and the 30-year notes at 8.875%.

Pakistan, which has Fitch and S&P ratings of B-(minus) and a Moody's rating of B3 - all considered "junk", has set a 4.8% GDP growth target for the year that began on July 1, after growth of 3.96% in the 2020/21 financial year.

The International Monetary Fund, which is holding discussions with Pakistan on a 39-month $6 billion financing programme that began in 2019, estimates GDP growth for 2020/21 at 1.5%, while the World Bank projects 1.3%.

Pakistan has set a fiscal deficit target of 6.3% for the 2020/21 fiscal year, lower than the 7.1% expected in the outgoing year.

Credit Suisse, Deutsche Bank, Emirates NBD Capital, JPMorgan, and Standard Chartered arranged the tap.

As per the news agency, the deal was arranged by Credit Suisse, Deutsche Bank, Emirates NBD Capital, JPMorgan, and Standard Chartered.

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