BIBD is co-lead manager of IDB sukuk issue

THE Islamic Development Bank (IDB) has appointed Bank Islam Brunei Darussalam (BIBD) as co-lead manager for its latest global sukuk offering, according to a report by Saudi-based English daily Arab News.

Initially proposed at US$500 million, the IDB will be issuing its latest global sukuk bonds "very soon", its head of treasury Mohammed Tariq was quoted as saying in the report. Tariq said there is a good chance that the issue size may increase to US$750 million "or even US$1 billion".

BIBD could not be reached for comments during the public holiday yesterday. BIBD along with Malaysia's CIMB group have been appointed as co-lead managers while HSBC, Deutsche Bank and BNP Paribas have been appointed as lead arrangers.

"The minimum amount for the sukuk is US$500 million which is the same as our previous issuance. We hope that the upcoming issuance will be larger. But this will depend on market conditions including enough liquidity in the market, the currency and the quality of the assets," said Tariq.

Investors and issuers in the aftermath of the credit crunch and the global financial crisis are much more aware of cost and pricing of sukuk, he said, adding that the subsequent sukuk market slowdown in 2008 and first quarter of this year is a "sign of maturity" and not a result of a market bubble.

The Jeddah-based institution is issuing the latest sukuk as a tranche under its US$6 billion sukuk and medium-term note programme partly aimed at helping member countries to mitigate the impact of the global financial downturn and the rise in commodity prices.

At least 25 of the 57 IDB member countries are classified as least-developed countries (LDCs), which include some of the world's poorest nations.

Sukuk or Islamic bonds have been billed as a safer alternative to conventional bonds because of underlying assets.

While sukuk remains attractive even in comparison to conventional bond issuances, analysts have recently observed the rise in instances of defaults. One prime example is Investment Dar's US$100 million sukuk default.

Islamic bonds, or sukuk, are structured as profit-sharing or rental agreements and their returns are derived from underlying assets. Hadi DP Mahmud

The Brunei Times