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The Securities and Exchange Commission of Pakistan (SECP) has issued definition of "Government Guaranteed Sukuk" i.e. Sukuk issued by any corporation or body corporate owned and controlled by the Federal Government and such Sukuk is guaranteed by the Federal Government.

This definition has been given in the revised Public Offering Regulations, 2017 issued by the SECP here on Friday.

Under the said regulations, "Sukuk" means an instrument of equal value representing undivided share in ownership of the identified tangible assets, usufruct and services or in the ownership of the assets of particular projects or special investment activity. Through these regulations, the SECP has also issued Book Building Mechanism for debt securities under which total issue size of the debt securities shall be offered/allocated to the general public and retail investors.

According to the amendments proposed in Public Offering Regulations, 2017 by the SECP here on Friday, "Book Building" in case of debt securities means a process undertaken to elicit demand for debt securities under which bids are collected from the bidders and a book is built which depicts demand for the debt securities at different profit rate/spread levels.

Under the Public Offering Regulations, 2017, the regulations shall apply to a public limited company or body corporate proposing to issue securities to the general public; an offeror who intends to offer securities to the general public and sponsors of the public limited company or body corporate, the consultants to the Issue, the Underwriter, the Book Runner, the Designated Institution, the Banker to an Issue, investment agent and Issuing and paying agent.

Under the Book Building Mechanism for debt securities, the SECP stated that an issuer can adopt book building mechanism for discovery of profit rate in case of fixed rate instrument and spread (+/-) in relation to the Kibor in case of floating rate instrument. Bid for the purpose of this regulation means intention to buy specified number of debt securities for a particular spread/profit rate quoted in basis points.

The Book Building shall be conducted as per the conditions and procedure prescribed. The total issue size of the debt security shall be offered to the General Public including both book building portion and retail portion. The maximum 75 percent of the issue size shall be allocated to the Book Building portion and the remaining 25 percent to the retail investors. The retail portion of the public offer shall be fully underwritten.

The Issuer shall enter into a tripartite agreement in writing with the Designated Institution and the Book Runner. The said agreement shall specify inter-alia, the rights, privileges, duties, responsibilities and obligations of each party to the agreement and shall provide a clause on dispute resolution mechanism among the parties to the agreement: The Issuer shall publish the prospectus at least one day before the commencement of registration of bidders by the book runner. For Floating rate instruments, Bidder can enter spread on both positive and negative sides in relation to the KIBOR.

The Book Building shall be considered as cancelled if the Issuer does not receive bids for total number of debt securities offered under the book building. vii. Clause (9) to (15) of Regulation 8 and clause (1), (4) and (5) of Regulation 9 relating to procedure for Book Building and bidding of shares shall also apply in case of debt securities.

Copyright Business Recorder, 2020