Indonesia recently reinforced its status as a pioneer in the sovereign green Sukuk market with its sophomore issuance in February. The issuance, floated together with a 10-year Sukuk facility, received an orderbook of US$6.6 billion, notably lower than that of last year’s papers.
The US$2 billion dual-tranche issuance, consisting of a US$750 million 5.5-year green Sukuk paper and a US$1.25 billion 10-year Sukuk paper, is based on the structure of Wakalah, according to a document shown to IFN by one of the arranging banks. The assets used for the papers are consist of 51% state-owned assets including land and buildings, and 49% project assets which are under construction or to be constructed.
The green Sukuk will be used to exclusively finance or refinance expenditure directly related to eligible green projects as defined in the Green Bond and Green Sukuk Framework of the Republic.
Roadshows for the issuances were carried out from the 4th to the 14th February in various locations around the globe including Dubai, Jeddah, Zurich, Paris, Frankfurt and Kuala Lumpur. Paris, Frankfurt and Zurich were considered due to the relatively high concentration of socially responsible investors.
Following the roadshows, the initial price thoughts were released on the 12th February in the 4.2% area for the green Sukuk and 4.7% area for the Sukuk, ahead of the roadshow in Frankfurt and Kuala Lumpur with the intention to capitalize on the strong investor reception, constructive market backdrop and limited sovereign supply in the emerging market space to capture an opportune intraday execution window.
Following bookbuilding, final price guidance was announced at 3.9–3.95% for the green Sukuk and 4.45–4.5% for the Sukuk, with a final total orderbook of US$6.6 billion for both tranches. The total orderbook is lower than the US$7.2 billion achieved during the maiden US$3 billion dual-tranche issuance last year. Investors were from various regions around the world and included fund managers (FM), asset managers (AM), pension funds (PF) and central banks (CB).
The transaction saw strong Asian sponsorship and solid demand underpinned by Middle East Islamic liquidity, reinforcing the robustness and the depth of the Sukuk market and demonstrating strong investor appetite for the issuance. The issuance was in line with the Republic’s ongoing objectives to strengthen the global Islamic financial market and commit to environmentally sustainable green funding.
|Indonesia’s dual-tranche Sukuk|
12th February 2019
|Issuer||Perusahaan Penerbit SBSN Indonesia III|
|Obligor||Republic of Indonesia|
|Size of issue||US$2 billion|
|Mode of issue||Senior, unsecured, Regulation S and Rule 144A|
|Tenor||Green Sukuk: 5.5 years|
|Sukuk: 10 years||US dollar|
|Profit rate||Green Sukuk: 3.9%|
|Sukuk: 4.45%||Turkish laws|
|Maturity date||Green Sukuk: 20th August 2024 Sukuk: 20th February 2029|
|Arrangers||Deutsche Bank, Dubai Islamic Bank, HSBC, Mandiri Securities and Maybank|
|Governing law||English and Indonesian law|
|Legal advisor(s)/counsel||Clifford Chance, AZP Legal Consultants, White & Case and Assegaf Hamzah & Partners|
|Listing||NASDAQ Dubai and Singapore Exchange Securities Trading|
|Rating||Moody’s Investors Service: ‘Baa2/Stable’ S&P Global Ratings: ‘BBB-/Stable’ Fitch Ratings: ‘BBB/Stable’|