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Source: Reuters

UPDATE 1-Indonesia global sukuk to be backed by $650 mln assets

Published: 24 Mar 2009 22:20:19 PST

JAKARTA, March 25 - Indonesia's finance ministry plans to sell its first global sharia-compliant bond issue, or sukuk, before June, backed by 7.5 trillion rupiah ($650 million) worth of assets, a senior official said on Wednesday. The government of the world's most populous Muslim nation has already raised more than two-thirds of its gross debt issuance target for 2009, but it wants to tap a wider investor base using a broad array of instruments including sharia-compliant debt.

Rahmat Waluyanto, treasury director general, said the global sukuk would be issued before a Samurai bond issue which is planned for June, and that the size would depend on the underlying assets available.

"We will adjust it based on the underlying asset, and the underlying assets that we have are (worth) around 7.5 trillion rupiah," he told reporters.

Separately, Dahlan Siamat, an official in charge of Islamic debt at the ministry, said the underlying assets consist of government property in the capital Jakarta which are worth 7.24 trillion rupiah and in Bandung, the capital of West Java province, which are worth 250 billion rupiah.

The sukuk will be issued according to the ijara, or lease-based, principle.

Islamic law bans interest payments so bond holders are instead paid income derived from assets, for example rent from property, or from commercial transaction such as trade in goods and services. (Click on [ID:nISLAMIC] for more Islamic finance stories and <ISLAMIC> for a speed guide)

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