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Thu 27 Aug 2009 09:59 AM

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IDB sets up $1.5bn bond, gets Moody's Aaa rating

Saudi bank has created a Islamic bond medium term note (MTN) programme, ratings agency says.

The Islamic Development Bank (IDB) has set up a $1.5bn Islamic bond medium term note (MTN) programme, ratings agency Moody's said late on Wednesday.Moody's rated IDB's bond programme at Aaa.

"The net proceeds of the issue of such certificates will be used to purchase a portfolio of sukuk assets which may comprise ijara assets, murabaha contracts, istisna'a contracts and Islamic Development Bank's investments in equity and sukuk certificates," Moody's said in a statement.

Saudi-based IDB said in July it would most likely delay a $500 million Islamic bond issuance until early September after the summer holidays.

HSBC, Deutsche Bank and BNP Paribas are lead arrangers with Malaysia's CIMB and Brunei Islamic Bank co-arrangers for the sukuk.

The triple-A rated lender plans to issue the sukuk as part of a bond programme to soften the impact of the financial downturn on its members, which include some of the world's poorest nations.

State and corporate issuers in the Gulf, the world's largest oil exporting region, have raised more than $10 billion by issuing bonds over the last five months.

Islam bans interest, and sukuk returns are derived from underlying physical assets which typically pay a rent or profit to bondholders. (Reuters)

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