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Capital Markets

Innovations in Islamic Finance 2015: Indonesia

$1.5 billion 10-year sukuk

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Advisers: CIMB, Emirates NBD, HSBC, Standard Chartered, Allen & Overy, Thamrin & Rachman, White & Case, AZP Legal Consultants

The Republic of Indonesia has built a reputation for innovation in its now annual sukuk outings – each time seeking to push the boundaries of its funding options. Last year was no different. Its $1.5 billion 10-year wakala sukuk in September in many ways encapsulates the direction in which sukuk could head, longer term – the market’s potential to attract conventional investors in the West, and its usefulness as a means to link investors in the capital-rich Gulf with issuers in fast-growing countries in Asia, Africa and elsewhere.

This was the biggest single-tranche sukuk of 2014 and the biggest sovereign sukuk of 2014. That size is important, as better liquidity helps developed market conventional investors buy sukuk (particularly when it is Indonesia, which is rated investment grade but can boast GDP growth in the region of 5%).

With a coupon of 4.35%, the deal was six times oversubscribed, after gaining orders from almost 400 investors.

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