Top banks submit financial bids to float sovereign bonds

ISLAMABAD: The government received an encouraging response as top European, American and Chinese banks have placed bids to secure the contract of financial advisers to structure Pakistan’s upcoming sovereign bonds to raise $1 billion for the bullet repayment next month, said Ministry of Finance officials.

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Two consortia out of the ten bids received will be hired, which will assemble the structures for floating Eurobond and Sukuk bonds during the next year, the ministry further informed.

The bidders from American and European banks include JP Morgan, Citibank, Deutsche Bank, Standard Chartered Bank, and Credit Suisse. Whereas, the Bank of China, Industrial and Commercial Bank of China and CLSA Capital Markets Limited have also submitted their technical and financial bids. Bids submitted from the Gulf include the Dubai Islamic Bank and Emirates NBD.

After evaluating the submitted bids this week, the bids will be opened by the ministry. To form a consortium, the other bidders can be asked to match the price of the lowest bidder.

Earlier, Citibank and Deutsche Bank remained the financial advisers, whereas, the Credit Suisse AG Group had won the bid to provide financial advisory services for one of the biggest privatisation transactions of two-LNG fired power plants. This is expected to bring out around $2 billion for Pakistan.

By hiring the consortia for one year, the Ministry of Finance aims to reach out to the global capital market at the right time to raise funds at a relatively better price.

Before the repayment of $1 billion, it is fundamental to maintain the official foreign currency reserves at current minimum levels.

The government may raise funds in small transactions that will help to get a good price, informed Ministry of Finance officials.

By the end of November, Sukuk will mature and the government will have to raise loans before that to keep the reserves at this level. This will also help meet the International Monetary Fund condition of Net International Reserves (NIR) for the end-December period. The end-Dec NIR target is negative $16.3 billion.

In addition to this, Pakistan has to pay $399.5 million in interest on all the outstanding amounts of Eurobond and Sukuks in this fiscal year. Commercial loans worth $2.3 billion that will also mature, which includes $1.7 billion of China Development Bank, $300 million of Bank of China, $100 million of Standard Chartered Bank and $200 million of Credit Suisse.

Despite IMF’s loan of $1 billion, a $500 million loans by the Asian Development Bank, and including $340 million foreign banks’ investment in government securities the gross official foreign currency reserves stood at only $7.7 billion as of October 4.

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