SINGAPORE, Jan 11: Pakistan will consider euro-denominated and longer-dated bonds when it comes to the international debt markets in the future, Ishrat Husain, Governor of the State Bank of Pakistan, said Tuesday.
"What we are doing is we are playing around with different instruments, different denominations, different currencies," Husain told Dow Jones Newswires in an interview.
"We'll go to euro, we'll go to the US, we will go for longer tenors. You start with the simple and then you migrate to more complex transactions." Husain was in Singapore to promote a benchmark-sized Islamic bond that is expected to price early next week. The offering will be Pakistan's second foray into the international bond market since a 1999 debt restructuring.
In February last year, it sold $500 million in five-year Eurobonds, attracting some $2 billion in demand. Husain forecast solid demand for the current bond, particularly out of the Middle East - the main target, where he said appetite was "voracious" - but said Pakistan was also targeting Asia and Europe with the deal. Part of Pakistan's goal has been to expand its investor base as widely as possible and garner international market attention.
The country has no real need for the cash raised by the offerings, Husain said. Starting over the weekend, two teams of investment bankers, central bankers and government officials have visited Saudi Arabia, Kuwait, Bahrain and Hong Kong, in addition to Singapore. The road-show will go to Dubai and Switzerland before wrapping up Monday in London, with pricing expected Jan 18.
Husain declined to be drawn on the size of the current bond, saying the government would first assess demand. Most anticipate the "sukuk" bond - backed by highway land - will be for $500 million.
Husain said a November credit rating upgrade to B+ by Standard and Poor's has helped galvanize interest in the upcoming bond but said he wasn't satisfied with the ranking.
"We are not still happy with that. We think we are BB. We did a comparison with other double BBs and on all indicators we do better," he said. "So we think that the market is ahead of the ratings agencies."
At B+, Pakistan is still rated below Vietnam, the Philippines and India. Moody's rates Pakistan one notch lower, at B2 with a stable outlook. Guidance on the upcoming bond has been set at 220 to 235 basis points over the six-month London Interbank Offered Rate. The outstanding 6.75% 2009 bond is trading around 215 basis points over Libor.