Diokno: Sukuk bond offering settled by mid-Dec.
At A Glance
- The Department of Finance (DOF) said the government will settle its maiden Sukuk bond offering by mid-December.<br>The offering will be a dollar-denominated "benchmark-sized" issue of at least $500 million with a tenor of 5.5 years.<br>Finance Secretary Benjamin E. Diokno said the government aims to raise approximately $1 billion from the offering.<br>The Treasury bureau has mandated banks, including Citigroup, Deutsche Bank, Dubai Islamic Bank, HSBC, MUFG, and Standard Chartered Bank, to oversee the Shariah-compliant sukuk bonds.<br>Banks will coordinate a series of investor calls starting on Nov. 27.<br>Sukuk bonds are structured according to Islamic principles, prohibiting the payment or receipt of interest (riba).<br>Instead of earning interest, sukuk investors will receive a share of profits generated by the underlying assets or projects.
The Department of Finance (DOF) said the government’s first-ever sukuk bond offering will be settled by the middle of December this year.
In a briefing on Tuesday, Nov. 28, Finance Secretary Benjamin E. Diokno said the Bureau of the Treasury has just announced the sukuk bond issuance, noting that it will not be completed quickly.
“We will raise it middle of December,” Diokno told reporters.
The sukuk bond offering from the Philippines will be in US dollars and will consist of "benchmark-sized" of at least $500 million, with a maturity period of 5.5 years.
When asked about the targeted amount to be raised from the offering, Diokno indicated that it would be approximately $1 billion.
On Monday, the Treasury bureau assigned banks to oversee the Shariah-compliant sukuk bonds.
The banks include Citigroup, Deutsche Bank, Dubai Islamic Bank, HSBC, MUFG, and Standard Chartered Bank, which will coordinate a series of investor calls starting on Nov. 27.
Sukuk bonds, which adhere to Islamic principles that prohibit the payment or receipt of interest, known as riba, are akin to conventional bonds. Instead of receiving interest, sukuk investors garner a share of profits generated by the underlying assets or projects.
An analyst explained, "Sukuk represent ownership stakes in specific assets, ventures, or projects, and the returns are based on the performance of these assets rather than fixed interest payments.”
Last September, Diokno said the government was looking at raising $1 billion from the first sukuk offering.
He also said Manila aims to attract institutional funds from the Middle East, which would be allowed to buy at least $200,000 worth of sukuk bonds.
Michael Ricafort, Rizal Commercial Banking Corp. (RCBC) chief economist said the new bond issuance could create market excitement and lead to higher bids due to improved market conditions.
These include lower US sovereign bond yields and a favorable environment for both bond issuers and investors.
Ricafort said this situation would benefit borrowers with lower borrowing costs and provides investors with relatively higher bond yields.