Maldives issues USD300 million Sukuk

On 29 March, the Government of the Maldives issued its debut international sovereign Sukuk amounting to USD200 million. With a five year maturity, the Sukuk was reported to be priced at a 9.875% semi annual coupon. On 26 April 2021, the Government issued an additional USD100 million at 10.5% when a 'tap' issue was reopened. 

The Ministry of Finance mandated the Islamic Corporation for the Development of the Private Sector (ICD) as the Lead Arranger with Credit Suisse, Emirates NBD Capital and HSBC acting  as Global Coordinators for the 144A/Reg S five-year transaction. 

The Ministry of Finance on 29 March 2021 also announced a tender offer for its previously issued USD250 million 7% 2022 bonds at par, meaning the proceeds from the new Sukuk issuance could be used to settle tender offers for the Government’s 2022 bonds. The country offering to buy back its USD250 million at par comes at a time when it is being traded 5% higher at 11.8% in the secondary market. 

The Sukuk, rated B3 by Moody’s, was issued from the recently established Maldives Sukuk Issuance Limited’s USD1.0 billion Trust Certificate Issuance Programme. The issue was settled on 08 April 2021 and was reported to be listed on the Euronext Dublin and Nasdaq Dubai.

The Maldives had gone to the international capital markets for the first time with its debut sovereign bond issuance of USD200 million in May 2017, and later a USD50 million tap issue in October 2017. In April 2018, the country also issued a USD100 million bond at 5.5% under private placement, set to mature in 2023.

The Sukuk issuance comes at a time of severe distress for the Maldivian economy due to, beginning in the first quarter of 2020, the continuing COVID-19 pandemic which has had a crushing impact on the tourism industry. In March 2020, the government closed the country's borders, leading to all tourist facilities in the country being shuttered. For an economy almost exclusively reliant on tourism, the Maldives did not have any inflows of foreign currency from the tourism industry for three and a half months, followed by months of severely limited inflows once borders were reopened for tourism in July 2020, as the pandemic continued to rage.

In November 2020, Fitch downgraded the Maldives’ country rating to CCC, noting at the time that the country was under external liquidity pressure. In May 2020, Moody's had downgraded its rating for the Maldives to B3, which is also the rating it has assigned to the Sukuk. 

The nation’s external debt, including publicly guaranteed debt, was at 76% of GDP at the end of December 2020. Together with domestic debt, total national debt is at 149% of GDP, far exceeding the threshold recommended by the IMF, while also falling drastically short of the advised below 60% of GDP as outlined under Section 32 of the country's Fiscal Responsibility Act.

The newly committed external debt includes a USD1.250 billion credit line from the Export Import Bank of India secured by the Solih administration, of which USD400 million constitutes borrowing for the Malé-Villingili-Thilafushi Bridge proposed to be constructed under the Greater Malé Connectivity Project.