The US' Citibank and Deutsche Morgan Grenfell are poised to take the mandate to arrange a government securitisation deal worth up to $500 million, financial sources say. The banks bid for the mandate independently but have been asked by the Finance Ministry to join forces.

The sources say Citibank was the low bidder for the work. Final negotiations are understood to be ongoing. The US' Bankers Trust, with WI Carr, was also shortlisted for the mandate but is understood not to be in negotiations with the ministry. The transaction would involve an internationally-marketed paper worth $300 million-500 million. The deal would be secured against expatriate workers' remittances.

Money coming into the country from workers, mainly in the Middle East, totals $1,200 million-1,400 million a year. Most remittances are transferred to Pakistani banks in US dollars. Payments to workers' families are then made in rupees. Limitations on the amount of foreign exchange banks are permitted to hold allow the government to build up its foreign exchange reserves through such transactions. The securitisation deal would give the government immediate access to hard currency, secured against future remittances.

Citibank has already closed two similar but much smaller deals for the government. In December 1996, the bank managed the sale of one-year papers worth $75 million and in March 1997 closed an issue of $30 million. Both were secured against workers' remittances made through Citibank.

Recent foreign currency borrowings have included a $300 million Eurobond and $250 million secured against future income of Pakistan Telecommunication Company. Another $300 million Eurobond is to be sold in late October or early November by ANZ Investment Bank. Raising $500 million in a single issue would be a big step up, the sources say, adding that the amount has yet to be decided (MEED 3:10:97).