Jeddah, Kingdom of Saudi Arabia, 25 March 2021 - The Islamic Development Bank ("IsDB") raised US$ 2.5 billion with its Sustainability Sukuk, which is also its biggest US$ public issuance to date.
The Bank, rated Aaa/AAA/AAA by Moody’s, S&P and Fitch (all stable outlook), successfully priced the 5-year Trust Certificates under its US$ 25 billion Trust Certificate Issuance Programme. It was priced at par with a profit rate of 1.262%, payable on a semi-annual basis. This is the Bank’s first public issuance in 2021.
The Joint Lead Managers and Joint Bookrunners for this issuance are Citi, HSBC, Goldman Sachs International, NATIXIS, Société Générale, Standard Chartered Bank and Warba Bank. Kuwait International Bank was the co-manager.
Proceeds of the Sustainability Sukuk will be allocated to finance/refinance green (10%) and social development projects (90%) that are eligible under the IsDB’ s Sustainable Finance Framework, which was created in line with the Green Bond Standards, Social Bond Standards and Sustainability Bond Guidelines published by the International Capital Market Association (ICMA).
The issuance is the second AAA-rated Sustainability Sukuk in the global capital markets and complements the initiatives that IsDB has undertaken as part of its wide-ranging response to COVID-19 for its Member Countries. It marks the third trade based on the Bank’s Sustainable Finance Framework. The issuance attracted strong demand from real money investors looking for value and this was validated by IsDB’ s robust credit and financial position and reaffirmed by its AAA ratings. Due to the high demand, the Bank was able to tighten the pricing by more than 15% between announcement and closing.
The transaction was announced on Monday, 22 March and the Initial Price Thoughts were set at Mid Swap (MS) plus 39 (bps) area and released on the next day. With strong demand from investors, the deal was eventually priced at MS plus 33 bps, tightening by 6 bps, with an overall profit rate of 1.262% as against the previous largest US$ issuance in February 2020, which had a profit rate of 1.809%. This is one of the lowest profit rates that the Bank has achieved for a US$ public Sukuk.
In terms of the final allocation, the distribution was well diversified with 61% allocated to Middle East & North Africa, 24% to Asia, 13% to Europe, and 2% to others including US Offshore. Overall, the deal witnessed strong participation from real money accounts and official institutions as well as a number of first-time investors, a testament of IsDB’s credit strength, as 78% was allocated to central banks and official institutions, 18% to bank treasuries and 4% to fund managers, private banks and others.
The Trust Certificates will be listed on Euronext Dublin and NASDAQ Dubai.
Following the successful pricing, the President of IsDB, Dr. Bandar Hajjar stated: “As the world continues to find better ways to respond to the ongoing pandemic, IsDB is proudly leading with its role of mobilizing critically needed resources at low cost for its Member Countries in order to finance a green and resilient recovery. This is our second Sustainability Sukuk and also our largest issuance ever, once again reaffirming the demand for financing promoting Sustainability in a world stricken with climate emergency as well as a raging pandemic. It, also, demonstrates the strong confidence and trust that the investor community places in IsDB and its mission, for which we are very thankful. I, once again, call upon all stakeholders in the Islamic finance industry to promote both Green and Sustainability Sukuk market as innovative solutions to address the global challenges we face today, for a better future.”
Dr. Zamir Iqbal, the Vice President (Finance) and CFO of IsDB, commented: “We are delighted to have achieved yet another landmark Sukuk transaction as we continue to support the Bank’s COVID-19 response efforts. The range of investors have once again reposed their faith in our AAA-rated paper which provides best-in-class risk-adjusted returns. The lower cost of funding will enable IsDB to extend better financing terms to our Member Countries for supporting their critical needs during, and post, pandemic. We are also very pleased to see new investors participating in the Sukuk and we welcome them as our partners in development.”
Dr. Yasser Gado, the IsDB Treasurer said, “IsDB’ s largest-ever Sukuk issuance, since it became a frequent issuer back in 2009, plays a vital role toward accomplishing the bank’s ambitious funding plan for 2021. The size of the transaction, lower credit spread, and robust order book mirrored investors’ confidence in IsDB credit. We are delighted to see IsDB transactions acquiring new institutional investors with pace and determination. IsDB will continue its commitment to promote the awareness of Sukuk, as the renowned Sharia Compliant debt instrument within capital markets. We aim to build upon the momentum of the IsDB sustainable finance story for both climate as well as social development projects in our Member Countries. I would like to commend the IsDB Treasury team members and joint lead managers for their efforts in delivering an efficacious transaction.”
Maud Le Moine, the Head of SSA Debt Capital Markets at Goldman Sachs International, said, “A truly remarkable transaction executed by IsDB today, achieving their largest ever benchmark size at $2.5 billion, and largest Sustainability sukuk to date, thus securing invaluable resources to support its member countries. The quality of the orderbook and broad-based demand from investors warranted a 6bp move for a final spread of MS+33bps, one of their tightest historical prints. Huge congratulations to the IsDB team for a successful transaction by any metric – demand, pricing, timing and sizing outcome.”
IsDB is a multilateral development financial institution with 57 Member Countries and a mandate of delivering social and economic development in its Member countries and Muslim communities worldwide.