Pakistan successfully concludes first-ever 3-tranche capital market transaction: Hammad Azhar

• Hamad Azhar says government launched 5, 10 and 30 year Eurobonds at rate of 6%, 7.375% and 8.875%, respectively.
• Azhar says transaction is an indicator of "leading global investors' great confidence" in Pakistan's "economy and future outlook".
• Analysts say Pakistan’s dollar-denominated Eurobonds were oversubscribed by almost two times due to attractive interest rates.

Newly appointed Finance Minister Hammad Azhar Wednesday said Pakistan has successfully completed its first ever three-tranche capital market transaction, saying it reflected investors' trust in Pakistan's economy. 

"Pakistan has very successfully concluded its first ever 3-tranche capital market transaction yesterday," said the minister. 

Azhar said the government launched 5, 10 and 30 year Eurobonds at the rate of 6%, 7.375% and 8.875%, respectively. 

Read more: PTI government considering issuing Eurobond to raise up to $1 billion

The finance minister said the successful transaction was an indicator of "leading global investors great confidence" in Pakistan's "economy and future outlook".

The launch happened the same day Azhar was entrusted with the finance ministry portfolio.

Read more: Hammad Azhar replaces Hafeez Sheikh as new finance minister

Pakistan’s Eurobonds oversubscribed two times: report

Meanwhile, analysts said Pakistan’s dollar-denominated Eurobonds were oversubscribed by almost two times after receiving a positive response from investors due to the attractive interest rates.

Analysts forecast the country to raise $2 to $2.5 billion through conventional bonds with tenors of 5, 10 and 30 years.

Price guidance was 6% for five-year, 7.375% for 10-year and 8.875% 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% 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.

Read more: Govt retired more than $10 billion in debt in 2019-2020, documents show

“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% in the secondary market. The average yield over the last 3-month period for the same is around 5.8%, 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.