DIB acts as co-manager for Pakistan's first USD 600 million sovereign Islamic sukuk

The sovereign Islamic sukuk issue consolidates the status of DIB as an Islamic sukuk powerhouse as it follows the bank's single largest sukuk issue in 2004, which successfully closed the US$ 1 billion Dubai Civil Aviation transaction to fund the expansion of Dubai International Airport, Arif Kooheji, EVP, Investment and Corporate Banking Group at DIB, said.

This issue also highlights the title that DIB received in 2004 by Euromoney as the "World's No. 1 Islamic Financing Deals (Sukuk's) Lead Manager". "We wanted to ensure that we carry that momentum into 2005. We have also been encouraged by Pakistan's impressive economic indicators and are exploring all possibilities to be a greater participant in this turnaround," added Kooheji.

Given the growing popularity of sukuks, DIB wishes to lead the development of this specialized segment of Islamic banking, Kooheji said. "We believe there is a huge potential for issuers and investors as the secondary market for this paper develops," he added.

Pakistan issued the Islamic Sukuk a year after its successful entry into the bond market with the US$ 500 million Eurobond last February after a lapse of six years.
Commenting on the issue, Dr. Ashfaque Khan, Economic Advisor to the Ministry of Finance in Pakistan, said: "The overwhelming interest is an indication of the fact that investors are visibly impressed by the track record of reform and the performance of the Pakistani economy over the last 5 years, and this transaction represents their confidence in Pakistan."

He said that Pakistan's economy has seen a turnaround and continues to maintain a growth trajectory buoyed by falling debt and continued economic reform.

"There is no doubt that we have seen great interest in Islamic bonds in the Middle East and we would encourage other regional players to tap this investor base," said Dr. Khan.

Dr. Khan spoke about DIB's role in the Pakistan bond issue. He said: " DIB's participation and important contribution to the success of the transaction encouraged us greatly and is a living testimony to the traditional brotherly ties between the two Islamic neighbours."

"These sentiments have recently been supported by the upgrading of Pakistan's long-term foreign currency rating by Standard's and Poor's to B+. Originally, the issue was expected to be priced at a spread of 235 bps over the six month LIBOR rate. However, the interest generated resulted in a tightness of pricing which finally closed the spread at 220 bps," he pointed out.