FINANCIAL MARKETS - Govt set to offer third retail sukuk in February

The Finance Ministry’s Debt Management Office (DMO) officially appointed 20 banks and securities companies Friday as the sales agents of Islamic bonds (sukuk) that will be sold to Indonesian individuals next month, officials say.

Director general of debt management Rahmat Waluyanto said the government would not limit the amount of funds to be collected from the sukuk offering.

“The proceeds would not be more than Rp 10.8 trillion (US$1.2 billion), based on the amount of the government’s available underlying assets,” Rahmat told a press briefing after the signing of agreements on the appointment of the susuk retail sales agents.

Two sales agents involved in the offering, however, said the government aimed to collect about Rp 7 trillion from the Islamic bond issuance.

The yield will be decided on Feb. 2, and the Islamic debt papers will be offered from Feb. 7 to 18, Rahmat said, adding that sales agents include 11 commercial banks and nine securities firms.

“The coupon will be at par with the government’s regular bonds’ yields. But it will be higher than the state banks’ deposits rate because this is a substitute for deposits,” Rahmat said.

The bond, coded SR-003, is the third Islamic bond issued by the government to fund the country’s needs for financing. The previous two retail sukuk were also issued in the month of February, in 2010 and 2009, and sold aggressively with bids tripling the initial targets.

Last year’s retail sukuk coupon stood at 12 percent, almost doubling banks’ deposit rates of 7 percent per year, excluding taxes.

Finance Ministry director of Islamic financing Dahlan Siamat said that the third retail sukuk is a brand new product with no maximum amount of order.

“Maybe if one individual orders Rp 10 billion, then we will limit the order,” he said. “If necessary, we will target traders at the market.”

There are five benefits of investing in the retail sukuk, Rahmat said. “First, it is sharia-compliant. Second, there’s no default risk. Third, unlike deposits, retail sukuk is tradable. Fourth, the coupon is higher than deposits and is paid monthly. Fifth, the present value will not decline if investors keep the retail sukuk until the date of maturity.”

The retail Islamic bond issuance is among other means of financing that the government is implementing in hopes of raising over Rp 200 trillion worth of debt papers this year. Rahmat has said that the Finance Ministry is assessing different debt instruments to plug the 2011 state budget deficit of Rp 124.7 trillion, including samurai bonds, global sukuk and regular retail and non-retail bonds. (est)

Source : http://www.thejakartapost.com/news/2011/01/15/govt-set-offer-third-retail-sukuk-february.html  - Jan 15, 2011