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Saturday, May 25, 2024

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IsDB’s Sukuk: A landmark sustainability issuance

The IsDB’s US$1.5 billion five-year issuance is its first-ever sustainability Sukuk, a strong follow-up to its landmark green Sukuk issued in November 2019 and a demonstration of the multilateral’s commitment to prioritizing the UN Sustainable Development Goals (SDG) when responding to its 57 member countries. The paper is also touted as the first-ever ‘AAA’-rated sustainability Sukuk in the global capital markets. NESSREEN TAMANO has the details.

The Sukuk issuance was priced under the IsDB’s US$25 billion Trust Certificate Issuance Program at a spread of 55bps over five-year US dollar midswaps for a final coupon of 0.91% per annum, representing the lowest profit rate the bank has achieved for a dollar Sukuk issuance. It was well subscribed by global investors, with 53% allocated to the Middle East, 37% to Asia, 8% to Europe and 2% to others.

“The attractive pricing achieved in a market environment which is cautiously opening up once again validates the IsDB’s strong credit and financial position, reaffirmed by its ‘AAA’ ratings,” the bank said, adding that it made a compelling story for investors, especially sustainable and responsible investment ones, to participate in the orderbook.

In line with the IsDB’s Sustainable Finance Framework under the Social Projects Category, proceeds from the sustainability Sukuk paper will be used to assist member countries in managing the impact of the COVID-19 outbreak. The issuance is part of the bank’s US$2.3 billion ‘Respond, Restore, Restart’ aid package aimed at supporting the recipient countries’ healthcare systems and SMEs, which were the hardest hit by the pandemic.

The funds will be exclusively deployed toward social projects with a focus on access to essential services and SME financing and employment generation, under the SDG-3: Good Health and Well-Being and SDG-8: Decent Work and Economic Growth umbrellas. The project categories are identified as per the guideline standards set by the International Capital Market Association under its Sustainability Bond Guidelines (2018) and Social Bond Principles (2018).

Dr Bandar Hajjar, the president of the IsDB, said: “With the success of this transaction, I also call upon the Islamic finance industry to promote sustainable and social Sukuk as alternate asset classes that have the potential to counter the multifold impact of COVID-19.”

“The transaction demonstrates Emirates NBD’s growing capabilities in ESG [environmental, social and governance]-related financing, an area which will only grow in importance and relevance as businesses across the globe seek to maintain their resilience during these challenging times,” said Fahad Abdulqader Al Qassim, CEO of Emirates NBD Capital.

IsDB’s sustainability Sukuk
US$1.5 billion

June 2020
PurposeTo assist member countries in managing the impact of COVID-19
TenorFive years
Profit rate0.91%
Joint lead manager/bookrunnerCiti; Credit Agricole, Emirates NBD, GIB Capital, HSBC, the Islamic Corporation for the Development of the Private Sector, Natixis, Societe Generale, Standard Chartered Bank
Co-managerKuwait International Bank
InvestorsRegion: MENA (53%), Asia (37%), Europe (8%), others (2%)
Type: Central banks and official institutions (79%), bank treasuries (16%), fund managers and private banks (5%)
ListingNASDAQ Dubai, Euronext Dublin, Bursa Malaysia (under the exempt regime)
Rating‘Aaa’ by Moody’s Investors Service, ‘AAA’ by S&P Global Ratings, ‘AAA’ by Fitch Ratings
Each has a stable outlook

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