Issuer: Perusahaan Penerbit SBSN Indonesia III
Obligor: Republic of Indonesia
Size: $2 billion total
Structure: Wakala
Tenor: Five years, 10 years
Banks: CIMB, Citi, Dubai Islamic Bank, Mandiri Sekurities, Standard Chartered (lead managers, bookrunners)
Date: November 2023
There are some emerging-market sovereign issuers that are on investors’ priority buy lists each year for the regularity and quality of their issuance across bond and sukuk format.
The Republic of Indonesia, one of the most prolific issuers of sukuk globally, is one of those marquee sovereigns that investors look for and almost always show strong interest in when they come to market each year.
After biding its time, monitoring the market for an opportunity to issue amid rate volatility across much of the year, Indonesia finally made its move in November, issuing $2 billion in total across a conventional $1 billion five-year sukuk and a $1 billion 10-year green sukuk.
Together the tranches attracted an orderbook of over $5.6 billion, allowing the Indonesian treasury team and supporting banks to price the five-year at a spread of 86.7 basis points over Treasuries, with a profit rate of 5.40%, and the 10-year at 103.6bp over Treasuries, yielding 5.60%.
Such pricing was not only 25bp lower than initial guidance, but was also the tightest five- and 10-year spread at issue by an Asean sovereign in the past two years. It marked Indonesia’s tightest sukuk versus conventional bond differential.
Indonesia has been at the forefront of advances in green sukuk
The deal was also the largest dollar-denominated sukuk from an Asian sovereign last year.
Roughly half of each tranche was bought by European and US institutional investors, with the rest taken by Middle East and Asian buyers. Fund managers and banks dominated the allocation, with about a fifth of the green tranche going to central banks and official institutions.
The green sukuk is the sixth global green sukuk Indonesia has issued since its debut in 2018 and the second since it upgraded its green bond/sukuk framework into its sustainable development goals government securities framework in 2021.
This upgraded structure integrates green, social and blue sustainability objectives, and enables the issuance of a range of thematic bonds along with sukuk, such as blue bonds, proceeds from which are used for the protection and conservation of marine ecosystems.
Importantly, Indonesia broke new ground in this asset class last year when it issued a first-of-its-kind blue bond worth ¥20.7 billion ($130 million) in the Japanese market – marking the world’s first publicly offered sovereign blue bond aligned with International Capital Market Association principles.
Indonesia has been at the forefront of advances in green sukuk, and more broadly in helping to grow and develop the global sukuk market, demonstrated by the success of its November transaction.
