IFC launches second sukuk to support MENA projects
The International Finance Corporation (IFC), a member of the World Bank Group, announced on September 10 that it issued a US$100 million trust certificates through a special purpose vehicle, IFC Sukuk Company, in an effort to spur growth in developing economies. This is IFC’s second sukuk offering after its US$100 million debut deal in November 2009.
The Reg S five-year sukuk was structured based on the Shariah principles of wakala with a profit rate of minus 10bp over six-month US dollar Libor. The deal achieved the tightest pricing for a US dollar-denominated sukuk, according to Ahsan Ali, managing director and head of Islamic origination at Standard Chartered, which acted as a joint lead manager for the transaction.
The proceeds will be used to support IFC’s developmental financing activities in the Middle East and North Africa (MENA), and other parts of the world. It will initially be listed on Nasdaq Dubai, and an application has also been made to list the sukuk on the London Stock Exchange.
“As a non-Islamic multilateral, IFC’s sukuk is expected to help deepen the sukuk market in the countries of the Gulf Cooperation Council (GCC), sending a positive signal for the development of the Gulf region's markets," said IFC director for MENA Mouayed Makhlouf.
IFC deputy treasurer Bahar Alsharif said the sukuk issuance will help meet the funding needs of IFC’s private-sector clients in the Middle East and globally. “As a premium global issuer, IFC is keen to offer international and regional investors high-quality alternatives in Islamic financial markets.”
By type of investors, banks accounted for 75% of the sukuk, while official institutions bought 20% and fund managers 5%. Dubai Islamic Bank, HSBC and National Bank of Abu Dhabi were the other joint lead managers for the transaction.
Rated AAA by both Moody’s Investors Service and Standard & Poor’s, the IFC carried out its first Islamic finance investment in 1995, supporting a leasing project in Pakistan. To date, it has approved about 28 Islamic financing transactions worth a total of US$742 million.
In November 2009, the IFC became the first non-Islamic financial institution to issue a sukuk for term funding in the GCC countries. The five-year US$100 million deal was oversubscribed and was priced at 15bp over mid-swap. Backed by a portfolio of IFC projects, it garnered 15 orders, and 90% of the demand came from the institutional investors in the Middle East.