Islamic Development Bank places $1bn sukuk

July 23, 2014 - 1:38:15 am

Jeddah: Saudi Arabia-based Islamic Development Bank (IDB) issued $1bn in five-year sukuk earlier this month, the largest ever privately-placed transaction from the supranational institution.

AAA-rated IDB is looking to increase the number of sukuk it sells, partly to raise its profile among international investors and to secure similar pricing levels to other development banks — which can borrow at lower rates. The sukuk was priced on July 17 and carried a 1.8118 percent coupon at issue, underwritten by the IDB itself.

The deal follows a $100m three-year private placement in April and a $1.5bn five-year sukuk in February, the largest ever public issuance from the multilateral lender. IDB usually prints one public transaction a year, with plans to issue a benchmark-sized — around $500m — sukuk around May of next year. The bank upsized its sukuk programme to $10bn in December in part to cater to reverse inquiries, where an investor approaches an issuer with an offer to buy some of its debt. IDB, which promotes economic development in Muslim countries and communities, has expanded its development efforts after more than tripling its authorised capital in 2012.

In June, IDB relaunched an infrastructure fund aiming to raise $2bn — almost triple the size of the original fund; In July, it seeded a sharia-compliant aircraft leasing fund together with Airbus Group.