The Republic of the Philippines ( RoP ) on November 29 priced its inaugural sukuk offering amounting to US$1 billion, achieving its objective of expanding its funding base. The deal utilized real estate assets under the sukuk structure of ijara and wakala, together with an aspect of commodity murabaha.

The 5.5-year Reg S/144A trust certificates have a profit rate of 5.045% and were priced at a spread of 80bp over the US treasuries, which was in line with the final price guidance and 35bp tighter than the initial price range of 115bp. The certificates are issued by ROP Sukuk Trust ( in its capacity as issuer and as trustee ), a special purpose trust formed under the Philippine law and administered by the Land Bank of the Philippines – Trust Banking Group.

The deal generated a strong demand from a wide range of high-quality investors with a total order book in excess of US$3.8 billion. In terms of geographic distribution, 37% of the paper was allocated in Europe, 30% in the Middle East, 19% in the US and 14% in Asia.

By type of investors, fund and asset managers were the biggest buyers accounting for 60%, followed by banks with 24%, central banks, official institutions and agencies 8%, pension funds and insurance companies 7% and other investors 1%.

“We hope this transaction will create a positive momentum for Islamic banking and finance in the Philippines, and we look forward to the active participation of all the stakeholders,” Philippine finance secretary Benjamin Diokno says in a statement.

The net proceeds from the certificates received in connection with the sale of trust assets will be used for general purposes, including for budgetary support. Citi, Deutsche Bank, Dubai Islamic Bank, HSBC, MUFG and Standard Chartered acted as the joint bookrunners and lead managers for the transaction.

The landmark sukuk is part of the sovereign’s agenda to promote the development of Islamic banking and finance in the country. It marks the establishment of an active, liquid reference curve for other Philippine issuers to access the sukuk market in the future.

With this maiden sukuk, the RoP has joined the ranks of Malaysia, Republic of Indonesia ( RoI ) and Pakistan as the sovereign sukuk issuers in Asia in the US dollar market. The Hong Kong government has also accessed the sukuk market three times between 2014 and 2017, raising US$1 billion each time it tapped the market with tenors of five and 10 years.

The RoP issuance followed that of the RoI in early November this year, in which it printed a dual-tranche transaction totaling US$2 billion. The deal comprised of a five-year conventional sukuk amounting to US$1 billion and a 10-year green sukuk, also for US$1 billion.