The Bank, rated Aaa/AAA/AAA by Moody’s, S&P and Fitch (all stable outlook), successfully priced the 5-year Trust Certificates under its US$25 billion Trust Certificate Issuance Programme. It was priced at par with a profit rate of 0.908% to be payable on semi-annual basis. This is the Bank’s second public issuance in 2020.

The Joint Lead Managers and Joint Bookrunners for this issuance are Citi, Credit Agricole CIB, Emirates NBD, GIB Capital, HSBC, Islamic Corporation for the Development of the Private Sector (ICD), NATIXIS, Société Générale CIB and Standard Chartered Bank. Kuwait International Bank was the co-manager.

Proceeds from the debut Sustainability issuance will be exclusively deployed by IsDB towards social projects under IsDB’s Sustainable Finance Framework, with a focus on ‘access to essential services’ and ‘SME financing and employment generation’ categories under the umbrellas of ‘SDG-3: Good Health and Well-Being’ and ‘SDG-8: Decent Work and Economic Growth’ for its 57 Member Countries, to assist them in tackling the aftermath of the COVID-19 pandemic. The project categories are identified as per the guidelines standards set by from the International Capital Market Association (ICMA) under its Sustainability Bond Guidelines (2018) and Social Bond Principles (2018).”

The issuance, the first ever AAA-rated Sustainability Sukuk in the global capital markets, is one of the many initiatives that IsDB has undertaken as part of its wide-ranging response to COVID-19 pillared on the 3Rs – Respond, Restore and Restart – framework in its Member Countries. It marks the second trade based on the Bank’s Sustainable Finance Framework, which also served as the foundation upon which the Bank issued its debut €1 billion Green Sukuk last November.

The attractive pricing achieved in a market environment which is cautiously opening up, once again validates IsDB’s strong credit and financial position, reaffirmed by its AAA ratings. Coupled with its commitment to tackling the aftermath of COVID-19, it made a compelling story for investors to participate in the orderbook, especially SRI investors.

The book-building started on Wednesday, 17 June. The initial price thoughts were set at Mid Swap (MS) plus 70 (bps) area and released on the same day. Following a strong demand from investors, the deal was eventually priced at MS plus 55 bps, tightening by 15 bps, with an overall profit rate of 0.908% as against the last US$ issuance in February which had a profit rate of 1.8090%. This is the lowest profit rate ever that the Bank has achieved for a US$ public Sukuk.

In terms of the final allocation, the distribution was well diversified with 53% allocated to Middle East & North Africa, 37% to Asia, 8% to Europe, and 2% to others including US Offshore. Overall, the deal witnessed strong participation from real money accounts and official institutions, a testament of IsDB’s credit strength, as 79% was allocated to central banks and official institutions, 16% to bank treasuries and 5% to fund managers and private banks.

The Trust Certificates will be listed on Euronext Dublin, NASDAQ Dubai and Bursa Malaysia (under the Exempt Regime).

Following the successful pricing, the President of IsDB, Dr. Bandar Hajjar stated: “The debut Sustainability Sukuk is a major fillip for the Bank in its pursuit of tackling the aftermath of the pandemic. The funds raised will contribute towards critical interventions in our Member Countries in these unprecedented times and I would like to thank the Member Countries and the Sukuk investors for their confidence and unwavering trust in IsDB and its mission. With the success of this transaction, I also call upon the Islamic finance industry to promote Sustainable and Social Sukuk as alternate asset classes that have the potential to counter the multifold impact of the COVID-19 coronavirus.”

Dr. Zamir Iqbal, the Vice President (Finance) and CFO of IsDB, commented: “With the debut Sustainability Sukuk, we are delighted to have achieved another milestone in expanding the range of products we offer, and we are proud of supporting the Bank’s COVID-19 response efforts. Once again, investors across the board have reaffirmed their faith in our development and sustainability mandate and AAA-rated paper which provides best-in-class risk-adjusted returns. We will work to ensure that this lower cost of funding will contribute towards extending better financing terms to our Member Countries for supporting their critical and emergent needs during this pandemic. “

Dr. Yasser Gado, the IsDB Treasurer said, “With this breakthrough deal, we continue to achieve our funding objectives as demonstrated by the size and the lowest overall pricing for a public US$ Sukuk ever. Investor perception of our Sukuk has greatly improved since the last public trade in February and we will continue to work on it further when we return to the markets later in the year. The investor diversification we achieved shows that the IsDB sustainable finance story is gaining stronger traction in new markets and we hope to maintain this momentum for future issuances. We would like to commend the joint lead managers for their efforts delivering a successful deal. We also greatly appreciate the IsDB Treasury team members who worked hard in these extraordinary circumstances to successfully achieve this milestone.”

Tanguy Claquin, Head of Sustainable Banking at Credit Agricole CIB, remarked, “This is a flagship transaction in the development of social capital markets being the first Sukuk specifically allocated to the fight against COVID-19. It is a testament to IsDB’s efforts in providing assistance to its member countries through its 3Rs (Respond, Restore and Restart) approach. The success of this transaction in terms of pricing, size and strong investor interest opens doors for other Sukuk issuers who may consider ESG-linked transactions”.

IsDB is a multilateral development financial institution with 57 Member Countries and a mandate of delivering social and economic development in Member countries and Muslim communities worldwide.