Cabinet body approves $500 million exchangeable bonds

Pakistan enters global financial market after a gap of four years

ISLAMABAD:

The government on Tuesday decided to tap the international financial market for the first time in four years and approved the issuance of $500 million worth of exchangeable bonds.

The Cabinet Committee on Privatisation (CCOP) approved the capital market listings of the bond and directed the Privatisation Commission (PC) to actively carry out the transaction along with a roadmap.

Secretary PC Muhammad Ejaz Chaudhary informed CCOP that a roadmap for capital market transactions has been prepared which is based on extensive consultation with major financial institutions. The transaction will be jointly conducted by PC and the finance ministry.

Last time, Pakistan successfully floated euro bonds in 2007. It made an attempt to enter the global financial market in 2008 by issuing global depository receipts (GDRs) of some state-owned institutions but higher authorities stopped the finance ministry at the eleventh hour.

CCOP also approved the hiring of a financial adviser and the holding of non-deal roadshows as soon as possible for issuing the bond. The committee asked PC to float at least $200 million worth of bonds in the next three months.

The secretary PC told the meeting that a sub-committee of CCOP was required to deliberate on the structure and size of the transaction, including the timeline, selection of state-run enterprises for equity-linked bonds, summarised term sheets for convenience of the committee, institutional arrangements, plan for issuance of GDRs, initial public offerings (IPOs) and secondary public offerings (SPOs). The proposed plan will be of two years and will include a separate break-up for the current financial year ending June 30, 2011.

Roosevelt Hotel still on privatisation list

CCOP rejected an attempt to remove Roosevelt Hotel, a PIA property in the United States, from the active privatisation list. PC had sought the removal, arguing that due to a slump in the real estate market the privatisation of the hotel should be withheld for the time being, said a finance ministry official.

According to an official handout, the secretary PC said a couple of attempts made in the past to privatise Roosevelt had not been successful due to a downturn in the global real estate market. He also apprised CCOP of a government decision to erase the name of Roosevelt from the privatisation list.

The PC board has approved the proposal and recommended to CCOP to allow delisting and termination of the contract with the financial adviser hired for the transaction after clearing the dues payable under the contract. The privatisation minister said that the current idea is to leverage the balance sheet of the hotel and use it to buy airplanes for PIA.

The press release claimed that CCOP approved the PC’s proposal subject to concurrence by the Cabinet Committee on Restructuring (CCOR) to revisit the privatisation of Roosevelt. It suggested that a new attempt should be made to privatise Roosevelt as the global real estate markets have improved and this will allow PIA to focus on its core business.

Published in The Express Tribune, March 9^th, 2011.