Indonesia has appointed the Bank of New York Mellon to provide corporate trust services for its first sharia-compliant, US dollar-denominated sovereign sukuk.
Priced at $650 million, the five-year term ijara sukuk -- or Islamic bond -- was launched by the Perusahaan Penerbit SBSN Indonesia I (PPSI-I) special purpose vehicle with rights over 66 government properties. It has an annual fixed-rate yield of 8.8% payable annually or biannually. An ijara sukuk is a bond sale-leaseback agreement where the investor buys the asset then rents it to a client for a fee including the purchase price and profit earned during the rental period.BNY Mellon will act as delegate trustee, principal paying agent, transfer agent and registrar.
"Our work for the Indonesian government highlights the important role our company plays in supporting Islamic transactions and other complex structured finance deals globally," says Gary Lew, BNY Mellon Asia-Pacific head of corporate trust.
Indonesia's sukuk reopens the global US dollar-denominated sovereign sukuk market which has been closed since March 2008. The issuance is the largest since Dubai Port's 2007 sukuk.
Moody's gave the sukuk a Ba3 foreign currency rating with a stable outlook.
"The sukuk comes as Indonesian markets are enjoying one of their rosiest periods in months," says Lew. "Indonesia is in better economic shape than most places in the region and, while its economy is slowing, prices of its key soft commodities like palm oil are rising strongly."
The Asian currency sukuk market contracted by 1.5% to $63.4 billion in 2008 after growth of nearly 50% a year earlier, according to Moody's Investors Service. Indonesian rupiah denominated sukuks accounted for only 1.1% of the market.
According to Standard and Poor's, 45% of the sukuks issued in 2008 had an ijara structure.
BNY Mellon's corporate trust business services over $11 billion in outstanding debt globally.