Philippines raises $1B through maiden sukuk bonds offering

The Philippine government has raised $1 billion following its sale of US dollar-denominated Shariah-compliant financial instruments or sukuk bonds.

In a news release on Thursday, the Bureau of the Treasury said the successful issuance of the country’s maiden Sukuk bonds came after the government raised $3 billion from offering triple-tranche dollar-denominated bonds in January.

The Treasury said the net proceeds of financial instruments issued by the government “will complete the Republic’s external commercial funding this year which will be used for general purposes, including, but not limited to budgetary support.”

The government said the sukuk bonds, with a tenor of 5.5 years, was met with strong demand, with overbook subscription peaking at 4.90 times allowing the government to price it with a profit rate of 5.045%.

“The landmark maiden sukuk issuance is part of the Republic’s agenda to promote the development of Islamic banking and finance in the country. The sukuk issuance allows the Republic to diversify its global investor base and tap on Islamic-focused investors across the Middle East and marks the establishment of an active, liquid reference curve for other Philippine issuers to access the sukuk market in the future,” the Treasury said.

Sukuk is a financial instrument that complies with Islamic laws, by circumventing the traditional concept of interest through tying it with tangible assets or properties. Holders of sukuk bonds receive portions of earnings generated from tied assets.

For his part, Finance Secretary Benjamin Diokno said, “The success of our inaugural sukuk issuance affirms the Republic’s significant standing in the international capital markets and underscores investors’ conviction in our financial inclusion agenda.”

“We hope this transaction will create positive momentum for Islamic banking and finance in the Philippines, and we look forward to the active participation of all stakeholders,” said Diokno. —LDF, GMA Integrated News