Six banks tapped for inaugural sukuk

The government on Monday named five banks as joint bookrunners and lead managers for the country’s maiden Islamic bond offering.

In a notice, the Bureau of the Treasury said that Citigroup, Deutsche Bank, Dubai Islamic Bank, HSBC, MUFG and Standard Chartered would arrange fixed income investor calls in Asia, Europe, the Middle East and the United States beginning Nov. 27.

A benchmark-sized dollar-denominated sukuk offering with a 5.5-year tenor “may follow, subject to market conditions”.

“This will potentially be the Republic’s maiden sukuk issue after conducting a Philippine Economic Briefing in Dubai last September, with a target of diversifying the investor base towards Middle Eastern and Islamic countries,” the Treasury said.

The securities will be issued by a special purpose trust, the ROP Sukuk Trust, that will be administered by the Land Bank of the Philippines. The government said it expected the offering to be granted investment-grade ratings by Moody’s, S&P, and Fitch.

Moody’s said it was assigning a “Baa2” rating on the offering in line with the country’s rating,

“The Philippines’ Baa2 issuer rating is characterized by high potential growth and moderate government debt compared with peers, although the coronavirus pandemic had led to a weakening of our broader assessments for economic and fiscal strength,” the debt watcher noted.

“At the same time, the Philippines has sustained strong access to domestic and international funding markets, a stable banking system and ample foreign-currency reserves to weather global capital flow volatility,” it added.

Finance Secretary Benjamin Diokno has said that the government was looking to raise $1 billion from the sukuk offering and that Islamic issuances would help diversify the government’s sources of financing and widen the investor base.

Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said that since this would be a new issuance, market excitement could lead to higher bids.

“Market conditions locally and worldwide already improved since the start of November 2023,” he noted, adding that “both bond issuers and investors are in a sweet spot in terms of lower borrowing costs while investors would still enjoy relatively higher bond yields … so [this is] a win-win for both borrowers and investors”. WITH A REPORT FROM PNA