Pakistan To Sell Bonds Exchangeable Into State Fuel Company Shares

By Bloomberg News
April 14, 2008

Pakistan's top debt manager said the government will sell bonds exchangeable into shares of a state-owned company for the first time in more than a decade.

Pakistan hired JPMorgan Chase & Co., Barclays Plc, and ABN Amro Holding NV to manage the deal, the first since a 1997 issue, the director general of Pakistan's debt management office, Ashfaque Khan, said in an interview on April 12 in Washington. "It will most probably be in the first half." The plan indicates the government is confident in its ability to raise capital on global financial markets at a time when banks have posted billions of dollars of losses on complex credit securities. Sri Lanka, by comparison, won't attempt to sell international bonds because markets aren't "stable enough," the head of its central bank said last week.

Pakistan's bonds will be exchangeable into shares of the state-controlled Oil & Gas Development Co., the nation's biggest fuel explorer. Shares in the Islamabad-based company, 85% owned by the government, have climbed 15% in the past year. The company in February reported an 8% gain in second-quarter profit, spurred by the surge in oil prices. Officials are working with the banks on details including the size and terms of the offering, Mr. Khan said. The government opted for so-called exchangeable bonds because they are less expensive than conventional or Islamic debt, he said.