RoI prints 10-year sukuk at lowest yield

The Republic of Indonesia (RoI) continues to push the envelop on its sukuk fund raising when it priced on November 14 a 10-year, US$1 billion offering, which achieved a lower yield than the conventional bonds it printed earlier this year.


The Reg S/144A issue was priced at par with a periodic distribution of 3.30%. This is at the tight end of the final guidance of 3.35% area (+/- 5bp) and well inside the initial guidance of 3.50% area. The sukuk was quoted at 99.75 to par in the morning of November 15.


As one banker familiar with the deal points out, this was the lowest ever yield on a US dollar offering achieved by RoI in the international capital markets in any format and significantly lower than the 3.85% yield on the 10-year conventional bonds that it priced in April this year amounting to US$2 billion.


The pricing beats the RoI sukuk curve, coming just 30bp back of where the 2018s were trading, "When you consider that the Treasury curve alone for six to10 years is worth 60bp, it clearly shows that it outperforms that curve," the banker adds.


The 10-year tenor also represents a strategic move by the sovereign to develop its sukuk funding programme as it continues to push the tenor, having done five years in its sukuk debut in 2009 and seven years in 2011. There are only a handful of names that are able to print a 10-year tenor for sukuk and the latest offering was also RoI's first as an investment grade-rated sovereign.


The Indonesian debt team worked hard to achieve a successful result for this fund raising, visiting investors in Dubai, Abu Dhabi, Jeddah, Kuwait, Doha and Hong Kong over the course of last week. The timing was good, taking advantage of the low underlying rates with the 10-year Treasury rate down at 1.6% on November 14.


The deal attracted an order book of US$5.3 billion from 250 accounts, enabling the sovereign to diversify its investor base. In terms of geographic distribution, 30% of the bonds were sold to Middle East and other Islamic investors, 20% in Indonesia, 23% in the rest of Asia, 15% in Europe and 12% in the US. By type of investors, fund managers accounted for 40%, banks 35%, central banks and sovereign wealth funds 17%, private banks 5% and insurance companies 3%.


Deutsche Bank, HSBC and Standard Chartered Bank acted as the joint bookrunners for the transaction.







15 Nov 2012


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