Pakistan to launch first Panda Bond in December

Pakistan is set to issue its first Panda Bond in December, aiming to raise $250 million equivalent in Renminbi (RMB) through China’s national Interbank Bond Market.

The inaugural issuance marks a milestone transaction for Pakistan, paving the way for broader access to China’s deep and liquid RMB bond market.

According to documents, the program is currently under review by the Central Concepts Committee (CCC)/Central Development Working Party (CDWP) and is expected to move forward following regulatory clearances in both countries.

The Panda Bond is part of a broader program with a total ceiling of $ billion equivalent in RMB, subject to registration by China’s National Association of Financial Market Institutional Investors.

Given Pakistan’s current sub-investment-grade sovereign credit rating, the issuance will be backed by a robust credit enhancement mechanism. Achieving a domestic AAA rating is a requirement for accessing China’s high-grade Panda Bond market.

The Ministry of Finance has secured the support of two major multilateral institutions for the bond. The Asian Development Bank (ADB) will provide a guarantee of up to $160 million, while the Asian Infrastructure Investment Bank (AIIB) will back up to $125 million.

These unconditional and irrevocable guarantees, provided on a pro rata, pari passu basis, will cover up to 95% of the bond’s principal and accrued interest, significantly enhancing investor confidence.

The inaugural Panda Bond will be issued through a private placement to qualified institutional investors in China, targeting the country’s sophisticated and deep bond market.

The bond, denominated in RMB, will raise $250 million equivalent, with a fixed annual coupon expected to fall within the 3% to 4% range, depending on final pricing.

Structured with a three-year maturity, the issuance is designed to align with investor appetite in China’s high-grade debt market. The transaction is slated to take place before December, pending final internal and regulatory approvals in both Pakistan and China.

The issuance is being structured with the support of a consortium of top-tier financial advisors and underwriters, including China International Capital Corporation and Habib Bank Limited.