IDB achieves attractive pricing for its $1bn sukuk

The Islamic Development Bank (IDB), rated Aaa/AAA/AAA by Moody’s, S&P and Fitch (all stable outlook), has successfully priced $1 billion, 5-year, trust certificates (sukuk) issued at par with a 1.83 percent semi-annual profit rate under its $10 billion trust certificate issuance program. Despite an uncertain market environment, IDB achieved extremely attractive pricing, with the deal pricing approximately 22bps inside the secondary market levels. The trust certificates will be listed on the London Stock Exchange, Nasdaq Dubai and Bursa Malaysia under an exempt regime.
Book-building began on March 4 with the release of initial price thoughts of MS plus 10 basis points (bps) area on the back of which good momentum was built into the order-book.
This is a significant achievement of IDB’s continued efforts in positioning itself closer to its supranational peers through important investor meetings across key hubs of Asia, and Middle-East. IDB’s AAA ratings, strong financial position and commitment to support the liquidity of its sukuk, were other major reasons that guaranteed its success. CIMB, Dubai Islamic Bank, GIB Capital, HSBC, National Bank of Abu Dhabi, NCB Capital, Natixis, RHB Islamic Bank and Standard Chartered Bank acted as joint lead managers and joint book-runners, with Bank of London and Middle East as co-manager.
The issue saw strong participation from investors across the Middle East, Asia and Europe with 50 percent allocated to MENA, 35 percent to Asia, and 15 percent to Europe, respectively. There was strong participation from real money accounts and official institutions providing credence to IDB’s credit strength. Of the issuance, 54 percent was allocated to central banks, 28 percent to other banks, 10 percent to fund managers and 8 percent to other investor types.
On the occasion, Abdul Aziz Al Hinai, vice president finance, IDB, stated: "We are delighted with the outcome of the deal which achieved our main objectives by building on the success of our past transactions and achieving better pricing for the sukuk”. He thanked the IDB member countries for their continuous support and commended the lead managers for delivering a deal that fully met IDB objectives.
“We hope that the lower cost of funding in spread terms will allow us to extend attractive financing terms to member countries towards meeting their development needs.”