Indonesia Returns to Dollar Sukuk Debt Market After 18 Months

Indonesia Returns to Dollar Sukuk Debt Market After 18 Months
Indonesia Returns to Dollar Sukuk Debt Market After 18 Months

(Bloomberg) — Indonesia began marketing a dollar-denominated, benchmark-sized sukuk, facing the prospect of paying a premium for its first such issue in 18 months due to the global rise in borrowing costs.

Southeast Asia’s largest economy is offering five-year Sharia-compliant notes for its general financing requirements and 10-year green ones for expenditure as outlined under its sustainable securities framework, according to a person familiar with the matter, who asked not to be identified as they are not authorized to speak about it.

The sharp rise in US interest rates over the past two years is having knock-on effect on Indonesia, where the government regularly taps the offshore bond market. Officials in Jakarta sold dollar debt in January, while their last dollar sukuk transaction took place in May 2022.

Initial price talks for the five-year tranche were in the 5.65% area, while for the 10-year portion they were in the 5.85% area, according to the person. Data compiled by Bloomberg indicate that would be a premium to the seller’s existing dollar securities. In addition to the change in US interest rates, other factors may also contribute to the difference in pricing.

While the government didn’t lay out exactly how the green proceeds would be allocated, its sustainable securities framework lists a number of projects, such as developing wind or hydropower plants, or implementing energy performance standards and energy efficient labels for equipment.

Earlier this year, Indonesia sold yen-denominated bonds, with funds from some tranches earmarked for ocean conservation and climate change mitigation.

CIMB Group Holdings, Citigroup Inc., Dubai Islamic Bank PJSC, Mandiri Securities and Standard Chartered Bank Plc are acting as joint bookrunners for the deal, according to the person.

–With assistance from Yudith Ho.

(Adds context on relative pricing throughout, banks in the last paragraph)

©2023 Bloomberg LP

The article is in Dutch

Tags: Indonesia Returns Dollar Sukuk Debt Market Months


PREV Suspect arrested for murders of homeless people in LA
NEXT Gunay Uslu becomes CEO of Corendon, resigns as State Secretary for Media