The hard pressed government due to the rising fiscal deficit and drying of external inflows still plans to launch Exchangeable Bonds (EBs) of Oil and Gas Development Company Limited (OGDCL) with transaction size of $500 million having no upsize option, if advised by Financial Advisory Consortium (FAC) based upon the market conditions during the current fiscal year, an official source said. The government had earlier planned to launch the bond during the last fiscal year, but was dropped due to the extremely volatile global financial climate stemming from the European debt crisis and concerns over USA fiscal policy. The government had held road shows for investors in Hong Kong, Singapore and London last year in June, in which investors remained cautious due to extremely volatile in the global financial climate. Financial Advisory Consortium advised the government to wait for the global markets to rebound and become slightly more stable. Currently, the transaction is stalled as sentiment in global financial markets remains weak due to European debt crisis and due to US credit rating downgrade.
The source that the matter would be pursued on the advice of Financial Advisory Consortium and underwriting agreement and launch term sheet would be signed jointly by secretary finance division and secretary privatisation division. He said meeting of the Cabinet Committee on Privatisation (CCOP) would be convened to ratify the final terms after the book of demand was built.
CCOP on March 8, 2011 approved a capital market transaction envisaging issuance of an OGDCL EB of a base size of $500 million. FAC comprising Citibank, JP Morgan, Credit Suisse and BMA Capital was appointed as book runners for the transaction. The bond will be issued to raise foreign currency debt financing with the tenor of the bond set at five years. The EB was to carry an option granted to the holder to convert or exchange the EB for shares of OGDCL subject to certain terms and conditions and upon conversion debt will be extinguished.
The option to convert the bonds into shares of OGDCL was a process of privatisation as per the advice of the legal counsels. At road shows the official team met several investors and briefed them on the government’s credit story and OGDCL story. However, the specific transaction terms were not discussed at the advice of the legal advisors. OGDCL privatisation has been on the government’s agenda for quite some time and various divestment and privatisation options have been considered by the ministry of privatisation. Prior to October 23, 1997, OGDCL was a statutory corporation. Petroleum Policy 1994 emphasised on the need for restructuring of the company on commercial lines through strengthening its board of directors and allowing it more autonomy in all administrative, operational and financial matters. Petroleum Policy 1994 also envisaged conversion of the company into a public limited joint stock company.
In November 2003, the government divested 5 per cent of its holdings in OGDCL. The said offer received an overwhelming response from the general public and was recorded as a landmark transaction in the history of Pakistan’s capital markets. In December 2006, the government divested further 10 per cent of its holding in the company. The company is also listed on the London Stock Exchange, where trading of its shares commenced on December 6, 2006. On August 14, 2009, the government launched a scheme called Benazir Employees’ Stock Option Scheme (BESOS) for the employees of state owned entities including OGDCL. Under the scheme, OGDCL Employees’ Empowerment Trust was formed through trust deed dated August 20, 2009 and 12 per cent of the share held by the government was transferred to the trust. The government presently holds approximately 75 per cent share in OGDCL.
