Government raises $1 billion from sukuk bonds

MANILA, Philippines —  The Philippines managed to secure $1 billion from the international debt market via the maiden issuance of sukuk bonds as the administration moves to diversify the country’s investor base.

The Bureau of the Treasury said the government raised $1 billion or about P55.42 billion after it tapped the global Islamic financial market for the first time.

The government borrowed $1 billion for the 5.5-year tenor, with a coupon rate of 5.045 percent.

The Treasury said the maiden issue was met with strong demand as the order book reached $2.45 billion, oversubscribing the auction by 4.9 times.

The government decided to upsize the transaction from an initial target issue of just $500 million.

The issuance utilized real estate assets under Ijara and Wakala, together with a Commodity Murabaha aspect.

The Treasury said the sukuk issuance is part of the agenda to promote the development of Islamic banking and finance in the country.

The offering is seen allowing the Philippines to diversify its global investor base and tap Islamic-focused investors across the Middle East.

It also marks the establishment of an active, liquid reference curve for other Philippine issuers to access the sukuk market in the future.

“This milestone transaction illustrates our ability to leverage the stable market conditions and access the international capital markets,” the Treasury said.

“The transaction attracted strong interest, not only from a wide range of high-quality Islamic investors, but also from others as well, showcasing investors’ confidence in the country’s credit profile,” it said.

Finance Secretary Benjamin Diokno, for his part, maintained that the issuance is an affirmation of the Philippines’ standing in the international capital markets and underscores investors’ conviction in the country’s financial inclusion agenda.

“We hope this transaction will create positive momentum for Islamic banking and finance in the Philippines, and we look forward to the active participation of all stakeholders,” Diokno said.

Proceeds of the sukuk bond will complete the country’s external commercial funding this year that will be used for general purposes, including but not limited, to budgetary support.

The sukuk issuance is the last global bond sale for the Marcos administration this year and is part of the target $5-billion issuance programmed for 2023.

The initial $3 billion via a triple-tranche global bond was already raised as early as January.

Another $1.26 billion from the first retail dollar bond issuance was also secured last month.

The sukuk bond is expected to secure a rating of Baa2 from Moody’s, BBB+ from S&P Global Ratings and BBB rating from Fitch.

The transaction is scheduled to be settled next week, on Dec. 6.

Citigroup, Deutsche Bank, Dubai Islamic Bank, HSBC, MUFG and Standard Chartered Bank acted as joint bookrunners and joint lead managers for the issuance.