$500m OGDCL exchangeable bond: Govt asked to tap world markets after election

WAQAR LILLAH

ISLAMABAD: Financial Advisory Consortium (FAC), hired by the government for the launch of Oil and Gas Development Company Limited (OGDCL) exchangeable bonds with a transaction size of $500 million in the international capital markets, have recommended to the government to access international capital markets after general election with greater political certainty in the country.

Documents available with Business Recorder revealed that the Consortium opined that capital markets have improved but are not open for Pakistan where geopolitical situation and upcoming elections are creating uncertainty and resultantly credit rating remains at fairly low level. Issuances from high quality and repeat issuers have been cleared but there is still a significant backlog of deals. New equity issuances are primarily happening in markets where there is strong domestic bid eg Malaysia and Philippines. Pakistan bond yields are back at pre–Non Deal road show levels (currently trading in 11 percent and 10 percent range), the documents stated.

The documents further revealed that in order to improve the pricing of the bonds and to generate investor’s appetite, Non-Deal road shows were held in Singapore, Hong Kong and London in June 2011. The Non-Deal road shows were well received by the global investment community. This is manifested by the fact that more than 50 meetings were arranged in the three cities with some of the leading investment funds. While the investors appreciated the Non-Deal road show presentation, they remained cautious due to extremely volatile global financial climate stemming from European debt crisis and concerns over US fiscal policy. Post-road show, the Financial Advisors advised the GoP to wait for the global markets to rebound before re-launching the transaction.

The Cabinet Committee on Privatization (CCoP) in its meeting held on 8th March 2011 approved a Capital Market Roadmap inter alia envisaging issuance of an OGDCL Exchangeable Bond of a base size of US$ 500 million, the documents maintained.

Documents stated that the CCoP further directed Privatization Commission (PC) and Finance Division to jointly carry out the transaction. Subsequently, PC in conjunction with Finance Division, Securities & Exchange Commission of Pakistan (SECP) and State Bank of Pakistan (SBP) conducted and completed the process of hiring of Financial Advisory Consortium (FAC) on May 16, 2011. The Consortium comprising Citibank, JP Morgan, Credit Suisse and BMA Capital were appointed as joint bookrunners for the transaction.