Indonesia: Deal of the Year
The government of Indonesia in late March 2016 issued its Islamic papers worth US$2.5 billion in two tranches: a US$750 million five-year facility and a US$1.75 billion 10-year facility — the largest Asian US dollar transaction. Speaking to CIMB Investment Bank, NURUL ABD HALIM brings you the landmark deal.
The Sukuk received exceptional interest from investors across geographies. The US$750 million five-year facility, which was priced at a 3.4% profit rate, drew investors from the Middle East (42%), Asia (excluding Indonesia) (31%), Europe (15%), the US (2%) and its home country (10%) while the US$1.75 billion tranche with a 4.55% profit rate was subscribed by investors from the Middle East (28%), Asia (excluding Indonesia) (25%), Europe (22%) and the US (15%). From the institutional side, asset managers grabbed the lion’s share of the issuance size followed by banks, central banks and sovereign wealth funds, insurance and pension funds and private banks.
Testament to its aspirations to become a strong advocate of Islamic finance, the Republic has made its mark in the domestic and also the US dollar Sukuk market as a regular and consistent issuer.
In doing so, CIMB IB noted, Indonesia continues to set benchmarks in the global Sukuk arena for other sovereigns and corporates, paving the way for the growth of Indonesia’s Islamic capital markets. Despite the lower investment grade ratings stamped by international rating agencies, the sovereign faced no challenges in the distribution of this Sukuk given its reputation as a seasoned issuer.
Adopting the Wakalah structure, proceeds from the transaction will be utilized for the issuer to meet part of its general financing requirements. The structure accorded the government with the flexibility in terms of the choice of the underlying assets for the transaction. Apart from being Asia’s largest US dollar transaction, the fifth Sukuk installment was also the largest and the first ever dual-tranche US dollar offering issued by the Republic under the program.
Summary of terms & conditions |
|
Issuer |
|
Obligor |
The Republic of Indonesia |
Size of issue |
US$2.5 billion |
Mode of issue |
Bookrunning |
Purpose |
The gross proceeds will be applied by the issuer for the purchase of the assets relating to the series from the Republic. The Republic will use the gross proceeds it receives to meet part of its general financing requirements |
Tenor |
Tranche 1: Five years Tranche 2: 10 years |
Issuance price |
100% |
Profit rate |
Tranche 1: 3.4% per year Tranche 2: 4.55% per year |
Payment |
Semi-annual |
Currency |
US dollars |
Maturity date |
Tranche 1: 29th March 2021 Tranche 2: 29th March 2026 |
Lead managers and bookrunners |
CIMB Investment Bank, Citigroup Global Markets, Deutsche Bank AG (Singapore branch), Dubai Islamic Bank, Standard Chartered Bank |
Principal advisor |
|
Governing law |
English/Indonesian law for asset-related documents |
Legal advisors/counsels |
Clifford Chance, Assegaf Hamzah & Partners (to the issuer), Allen & Overy, Hadiputranto, Hadinoto & Partners (to the arrangers and dealers) |
Listing |
|
Underlying assets |
Ijarah properties and project assets |
Rating |
|
Shariah advisors |
CIMB Islamic Bank, Shariah Advisory Board of Citi Islamic Investment Bank, Standard Chartered Bank Shariah Supervisory Committee, Dr Hussein Hamed Sayed Hassan, Shariah Advisor of Deutsche Bank AG (Singapore branch), and the Executive Committee of the Fatwa and Shariah Supervisory Board of Dubai Islamic Bank |
Structure |
|
Investor breakdown |
Tranche 1: By type Asset/fund managers – 40% Banks – 38% Central banks/sovereign wealth funds – 13% Insurance/pension funds – 5% Private banks – 4% By geography Middle East/Islamic – 42% Asia (ex-Indonesia) – 31% Europe – 15% US – 2% Indonesia – 10% Tranche 2: By type Asset/fund managers – 59% Banks – 25% Central banks/sovereign wealth funds – 8% Insurance/pension funds – 4% Private banks – 4% By geography Middle East/Islamic – 28% Asia (ex-Indonesia) – 25% Europe – 22% US – 15% Indonesia – 10% |
Face value/minimum investment |
US$200,000 and integral multiples of US$1,000 in excess thereof |