PC decided to relaunch convertible bonds

This will turnaround Rs. 265bn loss making units into Rs. 500bn profitable units

ISLAMABAD, (Fiancial Updates): The Privatisation Commission (PC) in its recent Board meeting decided to re-launch the convertible bonds proposal to strengthen Public Sector Entities (PSEs) in the given situation and to generate revenue for the government.

According to the PC, this activity can turnaround the Rs. 265 billion loss making Units into Rs. 500 billion profitable units. In March this year the World’s top 10 investment groups were asked to submit proposals along with market assessment for issuance of Oil & Gas Development Company Limited (OGDCL)’s Bonds, in accordance with Privatisation Commission (PC) Ordinance 2000.

The PC intends to appoint a Bookrunning Consortium for divestment of equity of OGDCL via a US $ 500 million exchangeable bond with an upside option of US $ 100 million with no sovereign resource. This transaction could supplement GoP’s efforts to raise funding from multilateral agencies including proposed amount of US $ 2 Billion by ADB and US $ 900 million from World Bank at very low rates. The groups will be asked to submit their separate sealed Technical and Financial proposals free of cost, indicating their relevant experience, competence of team, work plan, methodology and presentations with hard underwriting and coupon services.

The PC is also in the process of appointing advisors for restructuring of Eight (8) PSEs approved by the Cabinet. This will entail hiring of the advisors through the process of sending out RFPs to top ten Global advisors.

The PC Board approved to obtain proposals and detailed market assessment for in its meeting on March 18, 2010 attended by the representatives of Ministries of Finance and Petroleum & Natural Resources. Citibank, J P Morgan, Nomura Investment Inc; UK, Barclays Bank, Morgan Stanley, Goldman Sachs, Credit Suisse, Merrill lynch and others had also made presentations before the PC Board. All these financial institutions would now be asked for update their respective proposals and reports. The Minister for Privatisation Senator Waqar Ahmed Khan had already made a presentation in this regard to the President and the Prime Minister on June 28, 2010. A summary in this respect is being sent to the Prime Minister.

The OGDCL Bonds activity will build a diversified and high quality international investor base and would also improve standing of domestic capital markets through increased foreign institutional investors and foreign direct investment flows.