The Philippines attracted strong investor interest for its maiden Sukuk bond offer, allowing one of Asia’s most active sovereign borrower to price the debt paper at a lower profit rate.
Sukuk issuance utilized real estate assets under Ijara and Wakala, together with a Commodity Murabaha aspect, to arrive at a price.
Strong demand was evident, with the orderbook’s oversubscription peaking at 4.90 times. This allowed the Philippines to price its 5.5-year Sukuk at T+80 basis points, with a profit rate of 5.045 percent, representing a 35 bps compression from the initial price guidance of T+115 bps area.
The USD1 billion Sukuk bonds, which have a tenor of 5.5 years, marks the first time the Philippines has tapped the global Islamic financial markets in this structure, diversifying the government funding source. The Sukuk is expected to be rated Baa2 by Moody’s, BBB+ by Standard & Poor’s, and BBB by Fitch.
The transaction is expected settled on 6 December.
The landmark Sukuk issuance is part of the agenda to promote the development of Islamic banking and finance in the country. It also allows the country to diversify its global investor base and tap on Islamic-focused investors across the Middle East and marks the establishment of an active, liquid reference curve for other Philippine issuers to access the Sukuk market in the future.
The Sukuk issuance comes after the Investor Roundtable in Doha and the Philippine Economic Briefing in Dubai in September 2023, supplemented by a successful roadshow on this week.
“The success of our inaugural Sukuk issuance affirms the Republic’s significant standing in the international capital markets and underscores investors’ conviction in our 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,” said Finance Secretary Benjamin Diokno.
In January, the Philippine government raised USD3 billion triple-tranche conventional bond.
