The Pakistan International Airlines (PIA) raised Rs5.7 billion on Thursday with the conclusion of the book-building process for PIA Sukuk-I at the cut-off price of one-month Karachi interbank offered rate (Kibor) plus 100 basis points.
It’s the first corporate Islamic bond of 2021, which is government-backed and can be counted towards the statutory liquidity requirement of investing entities.
Speaking to Dawn, BankIslami head of Investment Banking Mohammad Haris Munawar confirmed the cut-off price for the 10-year Islamic debt instrument. BankIslami was the adviser and one of the three joint book-runners for the issue. Around 25 eligible investors participated in the bidding process, he added.
The book-building process was conducted for the issue size of Rs20bn, including the greenshoe option of Rs5bn. However, the response from investors was underwhelming, which forced the Ministry of Finance and the PIA to limit the issue size to Rs5.7bn.
PIA intends to use sukuk proceeds for its permanent working capital requirements and partial settlement of existing conventional/Islamic financing facilities.
“The instrument is more lucrative than the recently issued energy sukuk, but some investors held back probably because Covid-related travel restrictions have affected the airline business worldwide,” said Mr Munawar.
The instrument was privately placed, but will soon be listed on the Pakistan Stock Exchange.