ISLAMABAD: Pakistan on Monday launched the $1 billion Islamic bond – Ijara Sukuk – on the global capital market with a yield payable semi-annually of 7.95 percent and a seven-year maturity, i.e. January 31, 2029 .
The latest Sukuk bond, listed on the London Stock Exchange, proved to be the most expensive Islamic paper Pakistan has issued in recent years. Previously, a five-year Sukuk bond of the same denomination was forecast to yield 6.8 percent in December 2014, followed by 5.5 percent in October 2016 and 5.6 percent in December 2017.
Pakistan brought the Islamic bond to the international market after a little over four years. Collateralized in December 2017 at a yield of 5.6 percent, the last five-year Islamic debt instrument that matured last month had to be replaced with new paper – in this case, with a seven-year maturity and a yield of 7.95 percent .
There was no official announcement of the transaction due to an agreement with accountants and financial managers barring the Pakistani authorities (the client) from publicly speaking. The bond issuance date is January 31, 2022. The joint lead managers and bookrunners of the transaction included Dubai Islamic Bank, Standard Chartered Bank, Credit Suisse and Deutsche Bank AG.
The seven-year international Islamic product was launched by the Pakistan Global Sukuk Program Company (Special Purpose Vehicle or SPV) by pledging some highway projects owned by the National Highway Authority.
Two leading international rating agencies – Moody’s and Fitch Ratings – also issued new but unchanged ratings for Sukuk bonds a few days ago. The authorities have set themselves a target of around USD 3 billion from the international capital market for the current financial year. Islamic bonds are usually cheaper than traditional Eurobonds.
New York-based Moody’s Investors Service had assigned a B3-backed Senior Unsecured rating to US dollar-denominated Trust Certificates (Sukuk) issued by the Government of Pakistan through Pakistan Global Sukuk Program Company Limited (PGSPCL). The SPV is 100% owned by the GoP, and issuance of debentures and certificates of trust is ultimately the government’s obligation, Moody’s said. The rating assigned to Sukuk reflects the current GoP issuer rating. The trust certificates will represent direct, unconditional and non-subordinate commitments of the GoP, she added.
Fitch Ratings – another New York-based rating agency – had also kept the rating for global Sukuk government bonds at “B-“. It said PGSPCL was a legal entity in Pakistan and the issuer and trustee of sukuk formed primarily for the purpose of participating in the sukuk transaction. It is wholly owned by Pakistan.
Published in Dawn, January 25, 2022