Indonesia adds variety with US$3bn sukuk, including 30yr green tranche
By Daniel Stanton
SINGAPORE, Jun 3 (IFR) - The Republic of Indonesia, rated Baa2/BBB/BBB, priced a US$3bn sukuk including a green tranche, adding some variety to recent China-centric supply.
Combined order books were over US$10.3bn, including strong demand from central banks, sovereign wealth funds and insurers.
“The Islamic finance community really showed up for this deal, especially in Southeast Asia and the Middle East,” said a bookrunner.
A US$1.25bn five-year tranche priced at par to give a profit rate of 1.5%, a US$1bn 10-year at 2.55%, and a US$750m 30-year at 3.55%.
The deal was marketed in yield terms, and pricing translated to Treasuries plus 70.4bp, 95.7bp, and 125.5bp.
Joint global coordinators CIMB, Citigroup, Dubai Islamic Bank, HSBC and Standard Chartered set respective initial guidance at 1.9% area, 3% area and 4% area.
Indonesia’s conventional 2031 and 2051 dollar bonds were bid at respective yields of 2.24% and 3.08%. The sovereign’s sukuk typically pay 10bp–20bp over its conventional bonds, and a lead estimated the new sukuk priced 20bp–25bp back, in line with fair value.
Indonesia’s last offshore sukuk was sold in June last year, when spreads had widened as investors weighed up the likely economic impact of the coronavirus pandemic. That sukuk has always traded at a significant premium to Indonesia’s conventional bonds, and the new notes priced 15bp–20bp inside it, said a bookrunner. Fair value for the green 30-year was estimated at 3.65%, meaning that it benefited from a 10bp greenium.
The five-year tranche was increased slightly on strong demand, but the 30-year was capped due to the specific use of proceeds for green projects.
All three tranches were seen above par in secondary trading on Thursday morning.
Offshore sukuk from Asia has been fairly busy this year, with issuance totalling US$5.6bn including the new deal.
The Republic of Maldives opened issuance this year with a US$200m debut in March, followed by a US$100m tap the next month. Malaysia priced a US$1.25bn dual-tranche sukuk in April, including a 10-year sustainability tranche, and its sovereign wealth fund Khazanah Nasional completed a US$1bn dual-tranche offering in May.
The Maldives’ state-owned Housing Development Corporation is also rumoured to be considering a US dollar sukuk.
Books for Indonesia’s five-year tranche were over US$2.5bn from 103 accounts, including US$709m from the leads. Indonesia took 16%, the rest of Asia 34%, the Middle East and Islamic countries 33%, Europe 10%, and the US 7%. Fund managers took 23%, central banks, sovereign wealth funds and agencies 30%, insurers and pension funds 4%, banks 41%, and private banks and others 2%.
Orders for the 10-year were over US$4.8bn from 162 accounts, including US$2.389bn from the leads. Indonesia took 6%, the rest of Asia 35%, the Middle East and Islamic countries 29%, Europe 18%, and the US 12%. Fund managers took 40%, central banks, sovereign wealth funds and agencies 12%, insurers and pension funds 10%, banks 36%, and private banks and others 2%.
The book for the 30-year was over US$3bn from 146 accounts, including US$557m from the leads. Indonesia took 6%, the rest of Asia 34%, the Middle East and Islamic countries 8%, Europe 25%, and the US 27%. Fund managers took 63%, central banks, sovereign wealth funds and agencies 5%, insurers and pension funds 12%, banks 19%, and private banks and others 1%.
(Reporting by Daniel Stanton; Editing by Vincent Baby)
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