The Republic of Indonesia (RoI) returned to the global sukuk market as it priced on May 21 a US$2 billion trust certificates, representing the world's largest single tranche sovereign sukuk transaction ever.
The Reg S/144A 10-year deal was priced at par to yield 4.325%, or 22.5bp inside the initial price guidance. This was just 2.5bp tighter than the final pricing achieved in its previous sukuk issue in September 2014 amounting to US$1.5 billion, also for 10 years.
The sukuk is structured based on the Shariah principle of wakala, under which the sukuk assets consist of state-owned assets, including land and buildings (51%), and project assets that are under construction or to be constructed (49%).
The transaction was launched following a series of investor meetings in Asia, the Middle East and Europe. It generated a robust market response as it garnered orders exceeding US$6.8 billion from 240 accounts, with 41% of the sukuk allocated in the Middle East, 22% in Asia (including 10% in Indonesia), 21% in the US and 16% in Europe. By type of investors, banks accounted for 42%, fund managers 39%, central banks 15%, insurance companies 2% and private banks 2%.
This is the sixth US dollar denominated sukuk issuance by the RoI and the fourth to be drawn by the Perusahaan Penerbit SBSN Indonesia III - a legal entity established by the government solely for the purpose of issuing Shariah-compliant securities in foreign currencies in the international capital markets - under its recently upsized trust certificate issuance programme of US$10 billion.
The offering was in line with the RoI's funding plan for 2015 and its ongoing objectives of strengthening the global Islamic financial markets. It also further demonstrates the sovereign's commitment to enhance its Islamic finance credentials and to set benchmarks in the global sukuk arena.
The RoI has already raised US$4 billion from the US dollar bond market this year when it printed in January a dual tranche US$4 billion trade, equally split at US$2 billion for 10 years and 30 years.
The latest transaction was also the second sovereign sukuk to be priced in Asia in 2015 following the US$1.5 billion dual-tranche offering by Malaysia in April. That deal comprised of US$1 billion sukuk for 10 years and US$500 million for 30 years, the longest tenor ever for a sovereign sukuk.
Another sovereign sukuk issue is likely to be launched in the market soon as the Hong Kong SAR ended a global roadshow on May 21.
CIMB Investment Bank, Dubai Islamic Bank, HSBC and J.P. Morgan were the joint bookruners and lead managers for the transactions, while Arab Banking Corporation, National Bank of Abu Dhabi, Danareksa Sekuritas and Mandiri Sekuritas acted as co-managers.
