In a first , govt raise Rs 200bn through Sukuk at less than KIBOR rate

Pakistan Stock Exchange (PSX) held a gong ceremony on Monday to mark the successful book building and listing of Power Holding Limited’s (PHL’s) Rs 200 billion Pakistan Energy Sukuk II (PES II).

The book building process managed by PSX , was a landmark event which concluded on May 19, 2020. The listing of the Sukuk took place on July 28, 2020. The gong striking ceremony was held to formally mark this exciting event of the first ever debt issuance through book building and listing of the said debt issue (PES II) at the Exchange.

The gong striking ceremony was an exciting event with the CEO PSX welcoming the guests after which the Chief Guest along with the transaction leads struck the gong bell to open the market. Thereafter, followed the remarks by the SECP Chairman, Aamir Khan. The Chief Guest on the occasion, Dr Abdul Hafeez Shaikh, Advisor to the PM on Finance & Revenue congratulated the team on bringing the Sukuk Issuance to fruition.

He also appreciated the strong performance of the Exchange and congratulated PSX on being named the best performing market in Asia. This is particularly creditable considering the recent challenges faced by Pakistan and Karachi.

Welcoming the Chief Guest and other guests at the occasion, Mr. Farrukh Khan, CEO PSX, said, “It is an honour for me and all of us at PSX that the Honourable Advisor on Finance & Revenue, Dr. Abdul Hafeez Shaikh is visiting us to formally mark the listing of PHL’s Pakistan Energy Sukuk II. The competitive book building preceding the listing is a watershed event in itself not only for the Stock Exchange and the capital market of the country, but also for the economy in general”.

He further added, “It sets a precedence for other debt listings to engage in the state of the art competitive book building managed by the Stock Exchange, which will enable GOP and private companies to raise capital at the most competitive cost, while providing attractive investment opportunities to investors”.

Speaking at the occasion, Dr. Abdul Hafeez Shaikh, Advisor to PM on Finance & Revenue, said, “I congratulate all the market participants and transaction leads who made the listing of Pakistan Energy Sukuk II a success. It was an excellent team effort of Ministry of Finance Debt Office, SECP, SBP and PSX”.

The Advisor further stated, “For the first time the Government raised Rs 200 Bn through Sukuk at less than KIBOR rate, through competitive book building at PSX, saving Rs 18 Bn over 10 years of debt servicing”.

Power Holding Limited’s Pakistan Energy Sukuk II is a Shariah compliant debt instrument which was issued through the competitive book building process managed by Pakistan Stock Exchange.

This process allowed for a competitive price discovery and attracting a large number of investors. The success of this process can be gauged from the fact that the issue was over-subscribed by 70% or by about Rs 139 Bn against the targeted amount of Rs 200 Bn. The PHL Sukuk is a debt Marketing & Business Development instrument with 10-year maturity with semi-annual profit payments for investors. It is a 100% SLR eligible government guaranteed security.

The Government of Pakistan decided to issue the debt through PSX to improve pricing. PSX offers a state of the art book building mechanism which was used to determine the cut-off spread (-/+) in basis points (bps) over the 6 month Kibor rate, that the issuer will pay on semi-annual basis to successful investors. The competitive book building process for PES II helped raise the targeted amount of Rs 200 Bn at a rate less than the Kibor rate, i.e. Kibor minus 10 bps.

This translates to an annual interest saving of approximately Rs 1.8bn by the GoP as compared to the debt servicing on PES I which was earlier issued as a debt security by PHL.