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| Republic of Indonesia sukuk |
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When it came to market in late November last year, the Republic of Indonesia’s second globally marketed US dollar sukuk broke barriers in its maturity and yield.
The $1 billion deal was 6.5 times oversubscribed. It priced to yield 4%, which was 25bp inside initial price guidance of around 4.25%. This was also more than 2% below what Italy paid for a €3 billion five-year sovereign bond the same day, despite Italy’s higher rating.
The Indonesia deal traded up in the secondary market and indeed, in December, Fitch became the first of the big-three ratings agencies to restore Indonesia’s investment-grade status, which the sovereign had lost after the 1997 Asian financial crisis.
Partly thanks to roadshows in Riyadh, Doha, Dubai and Abu Dhabi, the Middle East accounted for about 30% of investors in Indonesia’s sukuk. But despite Middle Eastern investors’ habitual preference for five-year paper, Indonesia managed to extend its yield curve to a seven-year maturity.
The Shariah structure is on an ijara basis, involving the sale and lease-back of Indonesian state assets.
