The Republic of Indonesia (RoI) accessed the international debt capital markets for the second time this year, printing on May 24 its largest sukuk offering amounting to US$3.25 billion, including a green tranche.

The Reg S/144A offering comprised of a five-year conventional sukuk amounting to US$1.75 billion, which was priced at par with a periodic distribution rate of 4.40% per annum. This was 35bp tighter than the initial price guidance of 4.75% area and represented a re-offer spread of 164.4bp over the US treasuries. The other tranche was a 10-year green sukuk amounting to US$1.5 billion, which was also priced at par with a distribution rate of 4.70% per annum, or 40bp inside of the initial price range of 5.10% area. This was equivalent to a re-offer spread of 193.3bp over the US treasuries. Both tranches performed in the immediate aftermarket.

The transaction attracted a total order book of US$10.8 billion on the back of a strong demand. “This transaction shows that by targeting the right pockets of demand, including environmental, social and governance (ESG)-focused investors, emerging market sovereigns can access the market with a significant issue size,” says a banker familiar with deal. “The sovereign was also receptive to what the market was looking for in terms of tenors, and it has the flexibility in offering a transaction that works for investors.” RoI previously included a 30-year tranche when it tapped the sukuk market in 2020 and 2021.

The sukuk was issued in wakala format under RoI’s US$35 billion trust certificate issuance programme. In terms of demand, the five-year sukuk garnered total orders of US$5.7 billion from 241 accounts with 35% of the paper distributed in Asia, 30% in the Middle East, 18% in the US and 17% in Europe. By type of investors, asset and fund managers accounted for 41%, financial institutions and banks 30%, central banks and official institutions 20%, insurance companies and pension funds 8% and private banks 1%.

The 10-year sukuk generated a total demand of US$5.1 billion from 225 accounts, with 38% sold in Asia, 27% in the Middle East, 20% in the US and 15% in Europe. Asset and fund managers were also the biggest buyers with 49%, followed by financial institutions and banks with 30%, insurance companies and pension funds 13%, central banks and official institutions 7% and private banks 1%.

HSBC and Standard Chartered were the joint green structuring advisers for the transaction as well as joint bookrunners along with CIMB, Deutsche Bank and Dubai Islamic Bank. BRI Danareksa and Trimegah Sekuritas Indonesia acted as co-managers. The external review was conducted by CICERO and the International Institute for Sustainable Development.

RoI previously accessed the offshore bond market this year in March for US$1.75 billion that included a cash tender offer as part of its general cash management programme and its broader scheme to manage its external liabilities.