Jeddah’s Islamic Development Bank Sells $1bn Sukuk

Islamic Development Bank (IsDB), a Jeddah-based multilateral institution, raised $1 billion from the sale of a five-year Islamic bond, or sukuk, at par on Wednesday, overcoming a sell-off across global credit markets.

The senior, unsecured notes priced at a profit rate of 1.535 per cent, arranging banks said. The bank had earlier set final guidance for the issue at a spread of 30 basis points over midswaps.

Order books for the deal had reached just under $1.5 billion ahead of launch. The bank’s strong credit rating – AAA – and substantial regional support may have made it immune from general market volatility.

Credit markets took a battering on Wednesday on the back of the biggest rise in treasury yields in a year the previous day. As at 1130 GMT, 10-year treasury yields were 15 basis points higher at 2.16 per cent.

Improved housing data and strong consumer confidence, as well as hints from the Federal Reserve last week about a possible reduction in the asset purchase programme contributed to the sell-off.

U.S dollar bonds or sukuk in the Gulf tend to price off the Treasury yield curve, so any sharp movement in the benchmark yields will have an impact on pricing.

Dubai’s Majid Al Futtaim (MAF) Holding, another regional issuer which completed roadshows for a hybrid bond this week, had yet to announce any guidance for its upcoming deal at the time of writing.

Islamic Development Bank, whose largest shareholder is Saudi Arabia, has also more than tripled its authorised capital to $150 billion to better support development projects in its 56 member nations.

Qatar’s Barwa Bank, Credit Agricole, CIMB , National Bank of Abu Dhabi, Natixis , NCB Capital – the investment banking arm of Saudi’s National Commercial Bank, Royal Bank of Scotland and Standard Chartered were mandated arrangers on the sukuk.