Pakistan plans up to $1.25b in bonds
HONG KONG: Pakistan plans to raise up to $1.25 billion through a two-part bond, a much bigger issue than expected, and some analysts said it was trying to take advantage of the cheap money sitting around to help cover its trade gap.
Market sources familiar with the deal said on Tuesday the deal would comprise 10-year and 30-year tranches.
Previously, sources had said Pakistan was planning to sell a 10-year global bond and rating agency Standard & Poor's had said on Monday, when it assigned a B-plus rating to the transaction, that the offer was for up to $1 billion.
Pakistan issued international bonds in 2004 and 2005, aiming in part to set a benchmark for investors.
Pakistan officials said the new issue was also designed to build a benchmark yield curve, but some analysts noted the money was needed to cover a growing import bill caused by rapid economic growth and high oil prices.
"Last time they sold the thing to show their face in the debt capital markets. They said they didn't need the money. This time around, they don't mind getting the money either," one Hong Kong-based fund manager said.
"It's a lot of money coming at once if they don't price it cheaply enough," he added.
The indicative yield range for the 10-year tranche was set at 7.125 percent, but Pakistan had yet to fix the price guidance for the 30-year tranche, the sources said.
With imports climbing at a record pace, the country's current account deficit ballooned to $3.37 billion in the first seven months of fiscal 2005/06, which ends on June 30.
Economists expect the deficit for the full year to reach $5.0 billion, or four percent of gross domestic product, compared with $1.53 billion last year.
Pakistan's foreign reserves have taken a hit.
"International reserves fell from $13 billion around a year ago to roughly $11 billion at present. At this rate, reserve coverage will fall from over six months in June 2005 to levels between three to four months by June of this year," Bear Stearns said in a report.
Pricing of the two-part bond is expected later this week.
"The 30-year is a bit of a surprise, but it follows the other sovereigns that have managed 30 years in Asia, including Indonesia recently," said Dilip Parameswaran, head of Asian credit research at Calyon Corporate and Investment Bank.
"It's not just an Asian trend, but a global trend ... It reflects low interest rates long-term. It reflects particular demand for long-dated assets from pension funds and insurance companies." As well as Indonesia, the Philippines and Thailand have issued offshore sovereign bond this year.
Parameswaran also said the larger issue size reflected the ample liquidity in capital markets at the moment.
Pakistan is rated B2 by Moody's Investors Service.
Citigroup, Deutsche Bank and JPMorgan are joint bookrunners for the proposed bond issue. Pakistan, which had been under economic sanctions after conducting nuclear tests in mid-1998, returned to the international debt market in February 2004 with a $500 million, five-year eurobond. In January 2005 it sold a $600 million Islamic bond. Reuters
http://www.dailytimes.com.pk/default.asp?p...2-3-2006_pg5_10
HONG KONG: Pakistan plans to raise up to $1.25 billion through a two-part bond, a much bigger issue than expected, and some analysts said it was trying to take advantage of the cheap money sitting around to help cover its trade gap.
Market sources familiar with the deal said on Tuesday the deal would comprise 10-year and 30-year tranches.
Previously, sources had said Pakistan was planning to sell a 10-year global bond and rating agency Standard & Poor's had said on Monday, when it assigned a B-plus rating to the transaction, that the offer was for up to $1 billion.
Pakistan issued international bonds in 2004 and 2005, aiming in part to set a benchmark for investors.
Pakistan officials said the new issue was also designed to build a benchmark yield curve, but some analysts noted the money was needed to cover a growing import bill caused by rapid economic growth and high oil prices.
"Last time they sold the thing to show their face in the debt capital markets. They said they didn't need the money. This time around, they don't mind getting the money either," one Hong Kong-based fund manager said.
"It's a lot of money coming at once if they don't price it cheaply enough," he added.
The indicative yield range for the 10-year tranche was set at 7.125 percent, but Pakistan had yet to fix the price guidance for the 30-year tranche, the sources said.
With imports climbing at a record pace, the country's current account deficit ballooned to $3.37 billion in the first seven months of fiscal 2005/06, which ends on June 30.
Economists expect the deficit for the full year to reach $5.0 billion, or four percent of gross domestic product, compared with $1.53 billion last year.
Pakistan's foreign reserves have taken a hit.
"International reserves fell from $13 billion around a year ago to roughly $11 billion at present. At this rate, reserve coverage will fall from over six months in June 2005 to levels between three to four months by June of this year," Bear Stearns said in a report.
Pricing of the two-part bond is expected later this week.
"The 30-year is a bit of a surprise, but it follows the other sovereigns that have managed 30 years in Asia, including Indonesia recently," said Dilip Parameswaran, head of Asian credit research at Calyon Corporate and Investment Bank.
"It's not just an Asian trend, but a global trend ... It reflects low interest rates long-term. It reflects particular demand for long-dated assets from pension funds and insurance companies." As well as Indonesia, the Philippines and Thailand have issued offshore sovereign bond this year.
Parameswaran also said the larger issue size reflected the ample liquidity in capital markets at the moment.
Pakistan is rated B2 by Moody's Investors Service.
Citigroup, Deutsche Bank and JPMorgan are joint bookrunners for the proposed bond issue. Pakistan, which had been under economic sanctions after conducting nuclear tests in mid-1998, returned to the international debt market in February 2004 with a $500 million, five-year eurobond. In January 2005 it sold a $600 million Islamic bond. Reuters
http://www.dailytimes.com.pk/default.asp?p...2-3-2006_pg5_10
