Pakistan kicks off Asian bond deals

Pakistan kicks off Asian bond deals

Dow Jones, Singapore

Pakistan has sold US$600 million in U.S. dollar-denominated
Islamic bonds, kicking off Asian sovereign bond issuance for the
year.

Indonesia is now assessing fund-raising ideas submitted by
bankers at the end of last week, and the Philippines is widely
expected to come to the market in February.

Most other countries in the region -- including China and
South Korea -- are also set to return with hefty benchmark
issues.

"We were targeting $200 million to $300 million, but we were
encouraged by the response we received, which is about $1.2
billion," Waqar Masood, special assistant to Prime Minister
Shaukat Aziz, said on Tuesday in Islamabad.

Pakistan's five-year deal attracted orders from 82 accounts
and was priced below its existing 2009 fixed-rate Eurobonds, if
the longer maturity is taken into account -- indicating investors
were attracted to, rather than shaken by, the Islamic structure.

"The backbone of this deal was the Middle Eastern accounts,
and the sukuk structure. Where else would they get access to a
Pakistan credit?" said John Lefevre, Asia debt syndicate at
Citigroup Inc. in Hong Kong.

Pakistan's $500 million Eurobond, sold this time last year,
was trading around 216 basis points over Libor on Tuesday.

Under Islamic law, or Shariah, the payment of interest is
banned. The Pakistan deal used the most typical "sukuk"
structure, whereby property is leased or sold to a special
purpose vehicle, which then sells trust certificates to
investors. In Pakistan's case, the bond was backed by highway
land.

Lead managers Citigroup and HSBC sold the debt at par to yield
220 basis points over the six-month London Interbank Offered
Rate. That was at the bottom end of revised guidance of 220 to
225 basis points over Libor indicated earlier in the day.

The two banks had originally offered the bonds at a spread of
220 to 235 basis points over Libor.

Demand for the debt was widespread. The bond was distributed
47 percent to the Middle East, 31 percent to Asia and 22 percent
to Europe. At over $250 million, the Asian order book was
"pleasantly surprising," said a banker familiar with the deal.

Part of the attraction was the rarity of Pakistan debt. Many
investors also believe the country is underrated at B2 by Moody's
Investors Service and B+ by Standard & Poor's Ratings Services.
The primary market has also been quieter than expected.

"The supply we have seen so far this year is probably not what
people had expected. January has been a tad slower than expected,
although I think February will be busier," said one market
player. Pakistan's deal is only the third international bond from
Asia this year after much smaller corporate offerings from
Universal Robina Corp. of the Philippines and City Telecom Ltd.

The latest fund raising is Pakistan's second international
effort since a 1999 debt restructuring.