TUESDAY MAY 03: Sale of 10 percent government stake in OGDCL: banking syndicates submit bids to raise $500 million

KARACHI: Four banking syndicates have submitted bids to raise $500 million through equity-exchangeable from the international market against the sale of 10 percent Government of Pakistan stake in Oil and Gas Development Corporation Limited (OGDCL).
Two out of the four were found to be technically responsive and their financial bids submitted in a separate envelope were unsealed. Citi and Standard Chartered consortia have been called to Privatisation Commission for talks at 11.30pm on Tuesday (today).
Privatisation Commission has received presentations from the four banking syndicates at the end of last week. They are: (A) Citi, J.P. Morgan, Credit-Swiss and BMA; (B) Standard Chartered, Merrill Lynch, Barclays and KSB; (C) Deutsche, Nomura, Silk & NBP; and (D) HSBC, UBS, BNP and MIB. On Monday, a technical scoring exercise was started and financial bids were opened later in the day.
It is widely believed that Pakistan wants the sale of exchangeable bonds by end June 2011. And the banks have indicated that they need 45 clear days after receipt of mandate to complete the sale exercise. Government of Pakistan owns 75 percent, public shareholders 14 percent and employees the balance of 11 percent. After completion of the sale, the government's shareholding will reduce to 64 percent. However, if the banking syndicate can top-up the sale, government has indicated its willingness to further reduce its shareholding in OGDCL.
Since the money from sale of shares will not be used by OGDCL for its own use; the bond buyer would get exchangeable bonds and not convertible bonds. While the fee asked for by the banking syndicate to take the bond issue would be an all important factor in the PC's decision, the offers want the government to also take into account their track record for such issues and commitment to Pakistan as primary conditions.
The global league tables show Citi Consortium in an unbeatable lead. But the story is little different when such issues recently floated in emerging markets are taken into account specially when Asia-Pacific is considered, which are at present islands of liquidity. However, the size of the bond issue is small in international terms. Pakistan's Euro-bond due in 2017 is trading at discount plus coupon of 6.875.