The Islamic Development Bank (IsDB) has announced the issuance of its first Secured Overnight Financing Rate (SOFR)-linked Sukuk.
After the successful closing of its SOFR-linked issuance, the bank was rated Aaa/AAA/AAA by Moody’s Investors Service, Fitch Group, and Standard and Poor’s as the bank updated its $25 billion Trust Certificate Issuance Programme.
The LIBOR (London Inter-bank Offered Rate) is the most used interest rate benchmark globally in the current financial system. The benchmark provides an indication of the average rate at which a group of banks could get wholesale unsecured funding. While SOFR, the overnight rating rate for US-denominated derivatives and loans, can foster long-term liquidity and result in significant short-term trading volatility in derivatives.
IsDB’s transition to SOFR, the new global benchmark will be phased out by June 2023. The debut with SOFR is a three-year Floating Rate Note (FRN) that resulted in US$400 million from one investor on a Private Placement basis.
In a statement, the President of IsDB, Dr. Bandar Hajjar stated that the transaction is another pioneering effort of the bank as the Sukuk market leader in the Islamic capital market.