Central Banks Show Strong Interests in IDB's USD800 million Sukuk (By MIFC)

Malaysian and Asian investors subscribed to almost a quarter of the latest sukuk issuance by the Islamic Development Bank (IDB), which was closed in London in mid-June 2012.

Subscription, according to banks involved in the transaction, was dominated by the MENA region, largely institutional investors from the Gulf Cooperation Council (GCC) countries, which accounted almost three quarter of the allocation. European investors took up 6 per cent of the allocation.

The USD800 million sukuk was lead managed by CIMB, BNP Paribas, Barwa Bank of Qatar, HSBC, NCB Capital of Saudi Arabia and Standard Chartered Bank, who also acted as joint bookrunners. Al Hilal Bank from Abu Dhabi acted as co-lead manager. According to banks involved in the transaction, the 5-year sukuk, which matures on 26 June 2017, was priced at a profit rate of 1.357 per cent or 40 basis points above the benchmark mid-swap rate.

The order book reached USD900 million, with healthy demand from central banks and regulatory authorities, which received 55 per cent of the allocation, followed by banks with 35 per cent, pension funds and insurance companies with 6 per cent, and fund managers with 4 per cent. The IDB team, led by Vice President for Finance, Abdul Aziz Al-Hinai and encouraged by the interest from the central banks, decided to increase the size to USD800 million from the original target of USD750 million.

This, despite the impact of tough market conditions as characterized by the on-going Eurozone sovereign debt and bank crisis, the global financial crisis and the low growth economies of the industrialized countries.

The IDB has issued six sukuk in the international markets between 2003 and 2012 totaling USD3.8 billion.