Perusahaan Penerbit SBSN Indonesia III US$1 billion 3.3% Islamic bonds due 2022
Bookrunners: Deutsche Bank, HSBC, Standard Chartered
In recent years Indonesia has built itself a reputation second only to the Philippines as a smart and successful sovereign borrower in the international bond markets. While the latter has generally been a more active and aggressive issuer of debt, Indonesia has also diversified itself through its willingness to issue Islamic law-compliant bonds, or sukuk.
The country continued this emphasis in 2012, launching a 144a/Reg S Al-Ijarah sukuk, or effectively a bond based upon the partial ownership of an asset. The Indonesian government had completed two global sukuks before, but this deal stood out for its 10-year tenor, a rarity in the global Islamic bond market.
The transaction helped to develop the longer-maturity end of the global sukuk market, offering a big and liquid benchmark for other international borrowers. It also helped promote Indonesia as a strong borrower in this market, and offered an effective benchmark for Indonesian issuers to conduct longer-term sukuk transactions.
There is less demand for longer maturity sukuks among investors, particularly as many Middle Eastern investors are restricted to maturities of five years or less. Despite this, Indonesia managed to gain US$5.4 billion in demand for the deal, while offering a 3.3% profit rate for the transaction (which is effectively the coupon).
Other noteworthy transactions from Indonesia during 2012 included the Republic of Indonesia’s own US$2.5 billion bond issue conducted earlier in the year, which was the largest sovereign bond from Asia during the year, and a US$2.5 billion 10- and 30-year bond transaction from Pertamina, which stands as the largest global corporate deal from the country. Cikarang also did a US$500 million seven-year bond issue that enjoyed the lowest ever coupon rate for an Indonesian corporate.
All of these were well-executed, impressive deals. However for its benchmark and market expanding potential Indonesia’s sukuk gets our nod. While its pricing was not particularly competitive versus where it could have done a vanilla bond issue, it stands as an important benchmark for issuers in Asia and beyond.