Successful international 'Sukuk' issue for Pakistan arranged by HSBC Amanah

This was third sovereign Sukuk issuance that HSBC Amanah has arranged, following those for Malaysia and Qatar in 2002 and 2003 respectively.

A formal signing event to mark the successful launch and closure of Pakistan's inaugural Sukuk issue was held by the Government of Pakistan on 16 March 2005. This signing ceremony was attended by Dr Salman Shah, Adviser to the Prime Minister on Finance and Revenue, and Mr Ali Zaidi, Director HSBC Amanah and Mr Zubayr Soomro, Country Head Pakistan for Citigroup. The ceremony also included senior officials from the Government, as well as representatives from Pakistan's financial community.

The USD 600 million 5 year international Sukuk offering was launched by Pakistan in January. It was priced at 6-month US$ Libor + 220 bps and was structured to comply with Shariah principles, as well as with international bond conventions. HSBC and Citigroup acted as Joint Lead Managers and Joint Bookrunners for the issue.

Roadshows were held in Hong Kong, Singapore, Kuala Lumpur in Asia; Jeddah, Riyadh, Kuwait, Bahrain, Abu Dhabi and Dubai in the Middle East; and Geneva, Zurich and London in Europe. A delegation led by Dr. Salman Shah, Advisor to the Prime Minister of Pakistan on Finance and Revenue, and comprising Dr. Ishrat Husain, Governor State Bank of Pakistan, Mr. Nawid Ahsan, Secretary of Finance and Dr. Ashfaque Hasan Khan, Director General, Debt Office took part in the roadshows.

The response to the issue, with investors submitting orders of around US$ 1.2 billion, was one of the largest to a Sukuk offering to date. The size of the issue was originally targetted at US$ 500 million, but was increased in view of the strong and high quality demand from investors. Pakistan was also able to achieve an extremely attractive cost of funding through this innovative transaction.

The issue appealed to both conventional as well as Islamic institutions, and attracted demand from a wide geographic base. Central Banks and Government Agencies accounted for 25% of the transaction, and Asset Managers some 23%. Islamic Institutions claimed 20%, and banks 18%, with the remainder being taken up by private banks, retail intermediaries and insurance companies and corporates. The geographical distribution was also very balanced. The Middle East accounted for 47% of the issue, Asia 31% (out of which Malaysia represented 16%) and Europe 22%.

Iqbal Khan, Chief Executive Officer of HSBC Amanah, said: "This transaction is a significant vote of confidence in Pakistan, and augurs well for future investment in the country. The keen pricing of the issue shows the strong demand and appetite for Pakistan risk. HSBC is delighted to have played its part in ensuring the issue was a success."

Co Managers for the transaction were ABC Islamic Bank, Arab Bank PLC, Dubai Islamic Bank, Habib Bank A.G. Zurich, and National Bank of Pakistan (OBU).