Social Impact Deal of the Year
Making a debut on the 4th December 2014, the International Finance Facility for Immunization Company (IFFIm) successfully priced its inaugural US$500 million Sukuk Murabahah offering at 15bps over the three-month LIBOR, at the tight end of the initial pricing range. Speaking to Michael Bennett, the head of derivatives and structured finance at the World Bank, NABILAH ANNUAR studies in detail this historical transaction.
The IFFIm is an organization dedicated to rapidly accelerate the availability and predictability of funds for immunization. Resources raised by IFFIm are used by the Gavi, the Vaccine Alliance, a public-private partnership, which provides funds to purchase and deliver life-saving vaccines and strengthen health services in the world’s poorest countries. With the World Bank as its treasury manager, the Sukuk is believed to have signified a renewed interest from the World Bank and its subsidiaries in leveraging the Islamic market.
Auctioned to raise funding for IFFIm’s immunization efforts, the Sukuk is structured based on the principles of Murabahah. Acording to Bennett, various structures were considered but due to the nature of IFFIm’s activities and its lack of physical assets, the commodity Murabahah was deemed most appropriate for the fund-raising exercise. Proceeds for the Sukuk will also be channeled towards vaccine procurement and strengthening health systems and programs in many of the poorest countries in the world.
“IFFIm was an unfamiliar name for most Sukuk investors, and therefore we took time to visit as many investors as possible during both a non-deal roadshow in September and a deal roadshow immediately before pricing,” commented Bennett on the challenges faced in the issuance process. IFFIm marketed their Sukuk to investors in the UAE, Qatar, Saudi Arabia, Malaysia, Brunei, UK and Jordan, to a fruitful response. The philanthropic entity’s paper was heavily subscribed with a large investor base from the Middle East (68%), followed by Asia (21%) and Europe at (11%). In terms of investor type the Sukuk was distributed to banks (74%) as well as central banks and official institutions (26%).
Pointing out the unique features of the Sukuk, Bennett highlighted: The profit rate is paid on a floating rate basis which makes it one of the few, if only, highly rated floating rate Sukuk to be issued in recent years.” He further added that the issuance is the first Sukuk to channel its proceeds for a charitable purpose — savings childrens’ lives in the poorest countries of the world. Moreover, the paper is the largest debut Sukuk by a supra-national, signifying an impressive achievement considering the fact that IFFIm is one of the newest and smallest supranationals in the world.
The Sukuk was rated ‘Aa1’ by Moody’s, and the obligor carries a ‘AA+/Aa1/AA’ rating by Fitch, Moody’s and S&P, respectively. The issuance is hoped to encourage other supranationals and corporates to similarly tap socially responsible investments and utilize Sukuk as a tool to facilitate the purpose.
Summary of terms & conditions | |
Issuer | IFFIm Sukuk Company |
Obligor | International Finance Facility for Immunization Company (IFFIm) |
Issuance price | 100% |
Amount | US$500 million |
Tenor | Three years |
Profit rate | Three-month LIBOR+15 bps |
Status | Senior, unsecured trust certificates |
Sukuk structure | Murabahah |
Format | Regulation S |
Currency | US dollar |
Issue date | 4th December 2014 |
Maturity date | 4th December 2017 |
Global coordinator | Standard Chartered Bank |
Joint lead managers | Standard Chartered Bank, Barwa Bank, CIMB, National Bank of Abu Dhabi, NCB Capital |
Co-Lead managers | Bank Islam Brunei Darussalam and Union National Bank |
Governing law | English |
Legal advisors | To issuer on Cayman Islands’ law: Maples & Calder To obligor on English law: Slaughter & May To joint lead managers: Allen & Overy |
Listing | None |
Rating | ‘Aa1’ by Moody’s |
Investor breakdown (geographic) | Middle East (68%) Asia (21%) Europe (11%) |
Investor breakdown (by type) | Banks (74%) Central banks/Official institutions (26%) |
Delegate | Citicorp Trustee Company |
ISIN | XS1143356654 |