THE Philippines has formally launched its maiden offering of benchmark-sized Islamic bonds or Sukuk bonds with a minimum target of raising $500 million.
In a formal notice on Monday, the Philippines announced its benchmark-sized US dollar-denominated Sukuk offering in 5.5-year tenor.
The Philippines has mandated Citigroup, Deutsche Bank, Dubai Islamic Bank, HSBC, MUFG, and Standard Chartered Bank as joint bookrunners and joint lead managers, according to the announcement.
“This will potentially be the Republic’s maiden sukuk issue after conducting a Philippine Economic Briefing [PEB] in Dubai last September, with a target of diversifying the investor base towards Middle Eastern and Islamic countries,” it said.
Benchmark-size bond offerings amount to at least $500 million.
However, Finance Secretary Benjamin E. Diokno had earlier said that the national government plans to raise about $1 billion from the Sukuk bonds.
The country’s Sukuk offering is expected to be rated Baa2 by Moody’s, BBB+ by S&P, and BBB by Fitch, according to the announcement.
Later on Monday, Moody’s Investors Service (Moody’s) said it assigned “a backed senior unsecured rating of Baa2 to the Government of the Philippines’ first US dollar-denominated, Shari’ah-compliant trust certificate [sukuk] issuance maturing in 2029.”
Moody’s noted that its “sukuk ratings do not express an opinion on the structures’ compliance with Shari’ah law.”
The Sukuk bonds will be issued through the Philippines’ Sukuk Trust with the Land Bank of the Philippines-Trust Banking Group.
Michael L. Ricafort, Rizal Commercial Banking Corp.’s Chief Economist, said the yields or returns of the Philippines’s maiden Sukuk offering would be “somewhat similar” to the benchmark US dollar-denominated sovereign bonds.
Ricafort explained that the timing of the Sukuk offering came at a time when both domestic and global market conditions have improved amid easing inflation trends and pauses in policy interest rates.
“Since this is a new/debut issuance there could be some market excitement that would lead to higher bids/demand,” he said.
“Thus, both borrowers/bond issuers and investors are in a sweet spot in terms of lower borrowing/financing costs; while investors would still enjoy relatively higher interest rate income/bond yields that already topped out/reached a near-term peak or inflection point in October 2023, so a win-win for both borrowers/issuers and investors,” he added.
The Philippines programmed to borrow a total of P2.207 trillion this year, following a 75:25 mix in favor of domestic sources. (Related story: https://businessmirror.com.ph/2023/08/03/phl-outstanding-debt-seen-rising-to-p15-84-trillion/)
Bangko Sentral ng Pilipinas (BSP) officials earlier noted that the country’s plan to issue Sukuk bonds bodes well for the growth and development of Islamic banking and finance nationwide. (Related story: https://businessmirror.com.ph/2023/09/14/bsp-officials-optimistic-on-sukuk-bonds-gains/)
BSP Assistant Governor and Chairman of the Islamic Finance Coordination Forum Arifa A. Ala said the government issuing Sukuk bonds sends a strong signal that the country is ready for investments in Islamic banking.
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