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Eurobond issue heavily oversubscribed

ISLAMABAD (February 12 2004): A long list of diversified investors was offering $ 1.8 billion for $ 500 million Pakistan Eurobond benchmark issue putting the decision makers in choosy disposition way before closing books on Thursday.

Earlier on Wednesday morning, the investors from Asia, Europe and the Middle East lined up to offer $ 1.2 billion, which continue to swell till afternoon in London, (in Pakistan just after midnight) to $ 1.8 billion hoping to price below 6.8 percent against the comparable Turkish 7.35 percent and Philippines 7 percent bonds.

On Thursday after book closing final pricing would be determined and decision to allocate bonds would be made concluding a weeklong exercise by the two Pakistani teams invoking investors' interests judging market views about quick progress in Pakistan economy.

A source involved in the whole exercise said that no question regarding nuclear issue was raised. However, the investors were interested to know about the modes of succession of the government and key players involved.

Investors were appreciative of the economic growth Pakistan has shown in recent times.

Finance Minister Shaukat Aziz during the London road show has promised to come to the bond market each year and would also send his country business groups to tap international market for foreign loans.

Currently, only Dewan Salman has issued international bonds.

The finance minister said that the proceeds of these bonds would be used to retire country's expensive debt.

He also said that the government was serious in controlling borrowing and debt in future and for that a bill has been placed in the Parliament, necessitating the Parliament's approval for its breach.

The road show was attended by almost 60 investors, including 45 Pakistanis and others.

Pakistan has offered a tentative price of 6.75 percent to 6.85 percent. Earlier this week, a target yield of 6.875 percent had been set, an investor in London said.

The government has planned to sell these bonds to yield between 6.75 percent and 6.85 percent, a participant who made an offer for $350 million said.

The return is below than comparable Brazilian bonds, carrying better credit rating from Standard & Poor's.

Pakistan is benefiting from a plunge in borrowing costs for emerging market debtors over the past year as the investors seek alternatives to the lowest US interest rates in four decades.

Pakistan has a foreign debt rating of B2 at Moody's Investors Service announced in October 2003, equal to Brazil, which is five levels below the investment grade.

Standard & Poor's has assigned the rating of B in December 2002, one level lower than Brazil and five short of investment grade. Brazil's 14.5 percent coupon bonds maturing in 2009 yield 8.5 percent.

Pakistan rescheduled $ 610 million of debt in 1999. ABN Amro Holding NV, Deutsche Bank AG and J.P. Morgan Chase & Co are arranging the sale.

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