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Sun 14 Oct 2012 01:34 PM

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Islamic Development Bank places $500m sukuk

Saudi-based lender's deal priced at 30 basis points over three-month Libor

Islamic Development Bank places $500m sukuk
(Image for illustrative purposes)

Saudi-based Islamic Development Bank (IDB) issued a US$500m five-year Islamic bond, or sukuk, earlier this month, in a rare example of a privately-placed transaction from the supranational institution.

The deal was priced at 30 basis points (bps) over the three-month London interbank offered rate (Libor), according to market data, and was issued as part of the bank's US$6.5bn sukuk programme.

The sukuk was placed with a small group of investors following an initial reverse enquiry - where an investor approaches the issuer with a request to buy some of its debt - according to a source familiar with the deal.

The size of the private placement, at US$500m, is much larger than usually seen in the Middle Eastern debt markets, indicating strong demand for the paper.

Credit Agricole was the sole arranger of the deal.

"It's good to see an increasing number of credit quality investors showing interest in completing private placements with IDB," Hasan Demirhan, director of Treasury at IDB, said in a statement issued by Credit Agricole on Sunday.

AAA-rated IDB usually printing one public transaction a year. It last tapped the market in June, issuing an US$800m five-year sukuk which priced at 40 bps over midswaps.

The sukuk was trading slightly below par on Saturday, to yield 1.4 percent, according to Thomson Reuters data, versus the profit rate of 1.357 percent at issue.

IDB is looking to increase the number of sukuk it sells, partly to raise its profile among investors and secure similar pricing levels to other development banks which can borrow at much lower rates, the source said.

IDB provides project financing, loans and technical assistance for development schemes as well as establishing and managing special funds and trust funds in accordance with sharia principles.