By IFN
Launched on the 30th September at the tight end of initial price guidance of 0-2bps below midswaps, Luxembourg has finally priced its much-awaited inaugural Islamic debt at 0.436% – becoming the first sovereign in the eurozone to issue an Islamic debt.
The ‘AAA’-rated (by Moody’s and S&P) Reg S facility saw positive demand (although not as high when compared to earlier debuts by Hong Kong and South Africa) as the book-building process for the landmark EUR200 million (US$253.02 million) program reportedly amassed over EUR500 million (US$632.55 million) in orders and was twice oversubscribed. Carrying a tenor of five years, the Islamic debt was distributed across 29 accounts, with up to half of the program taken up by central banks (40%) and other official institutions, confirmed the finance ministry.
Although not the first sovereign Sukuk issue out of Europe, the facility nonetheless marks an important milestone not only for the Islamic finance industry as it welcomes growing interest from traditionally non-Muslim-majority jurisdictions including the UK, Hong Kong and South Africa, but also for Luxembourg as it anchors its ambition to become a hub for Shariah compliant finance.
“The Luxembourg Sukuk issuance is a very positive development for the Sukuk industry being a rare euro-denominated Sukuk from a strong ‘AAA’-rated sovereign,” said Hani Ibrahim, the head of debt capital markets at QInvest (joint lead arranger of the deal), who spoke exclusively to IFN. “It’s an issuance that will cement Luxembourg’s position as one of the premier Islamic finance centers and potentially boost the development of Islamic finance across Europe.”
The euro-denominated issuance proved popular among Middle Eastern investors as they formed the bulk of the purchasers at 61% while European investors took up 20% and Asian players 19%.
Banque Internationale à Luxembourg, BNP Paribas, HSBC and QInvest are the transaction’s arrangers.