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Monday, April 15, 2024

Launch Partners

Case study: DIB’s US$1 billion sustainable Sukuk

Dubai Islamic Bank (DIB) has issued its second US dollar sustainable Sukuk worth US$1 billion on the 13th February 2023. The issuance, which represents an upsize from the bank’s debut sustainable Sukuk issuance worth US$750 million in November 2022, was three times oversubscribed.

“The investor response for this latest issuance was overwhelming with more than US$3 billion of orders allowing us to issue a larger size well within our pricing parameters,” Dr Adnan Chilwan, group CEO of DIB, commented.

Dr Adnan noted that the bank is hoping to contribute to the UAE’s long-term sustainability objectives as it gears up for the upcoming 28th United Nations Climate Change Conference of the Parties (COP28). “We hope the success of our offering will encourage other issuers from the UAE to follow suit in this format.”

According to the program prospectus, a working group comprising representatives from corporate, treasury, investment banking, finance, risk and investor relations will be established as a subcommittee of DIB’s management credit committee to evaluate and select projects to channel Sukuk proceeds toward.

The Islamic bank can allocate the proceeds from the Sukuk program toward the financing or refinancing of eligible green and social projects. Green projects include renewable energy, energy efficiency, clean transportation, green buildings, pollution prevention and control as well as sustainable water and wastewater management projects.

Eligible social projects include employment generation and programs designed to prevent and or alleviate unemployment stemming from socioeconomic crises, affordable housing and access to essential services.

Notably, the Sukuk program excludes financing payday loans. ISFI reached out to the bank late last year for comment on why payday loans were part of the exclusion list. The bank did not provide clarification on the basis for its exclusion.

While DIB has a remaining US$5.75 billion it is able to issue under its current program size of US$7.5 billion, it is notable that the bank and the Sukuk trustees are able to upsize the program in accordance with the terms of the program agreement, further increasing DIB’s capacity to issue sustainable Sukuk.

DIB’s second sustainability Sukuk

US$1 billion

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13th February 2023
Summary of terms and conditions
Issuer
DIB Sukuk
Obligor
Dubai Islamic Bank
Size of issue
US$1 billion
Tenor
Five years
Issuance price
102.4bps over the five-year US treasury bill
Profit rate
4.8%
Currency
US dollar
Maturity date
13th February 2028
Lead manager(s)
Bank ABC, Dubai Islamic Bank, Emirates NBD Capital, First Abu Dhabi Bank, HSBC, KFH Capital, Mashreq, Sharjah Islamic Bank, Standard Chartered Bank and the Islamic Corporation for the Development of the Private Sector
Sustainability structurer(s)
Standard Chartered Bank
Bookrunner(s)
Bank ABC, Dubai Islamic Bank, Emirates NBD Capital, First Abu Dhabi Bank, HSBC, KFH Capital, Mashreq, Sharjah Islamic Bank, Standard Chartered Bank and the Islamic Corporation for the Development of the Private Sector
Governing law
English law
Islamic structure
Ijarah
Listing
NASDAQ Dubai, Euronex Dublin
Rating
‘A’ by Fitch Ratings and ‘A3’ by Moody’s Investors Service
Shariah advisor(s)
Shariah supervisory committee of Dubai Islamic Bank Dar Al Sharia Islamic Finance Consultancy Standard Chartered Global Shariah Supervisory Committee
Tradability
Yes
Face value/minimum investment
US$100,000

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