South Africa’s Debut sukuk bond worth $500 million was more than four times oversubscribed at the international capital markets on Thursday, the country’s Finance Ministry said.

The Islamic bond was priced at a coupon rate of 3.90 percent, which the National Treasury said “representing a spread of 180 basis points above the corresponding benchmark rate”.

The bond, which was arranged by  BNP Paribas, KFH Investment and South Africa’s Standard Bank Group will be listed on the Luxembourg Stock Exchange. The sukuk was issued through ZAR Sovereign Capital Fund Proprietary Limited.

The Islamic structure underpinning the sukuk involved the sale and leaseback of certain infrastructure assets owned by the Republic, with such assets to be repurchased by the Republic upon the redemption of the sukuk.

The Treasury said South Africa’s decision to issue an Islamic bond was “informed by a drive to broaden the investor base and to set a benchmark for state-owned companies seeking diversified sources of funding for infrastructure development.”

The investor distribution of the sukuk transaction consisted of 59% from the Middle East and Asia, 25% from Europe, 8% from the US and the remainder from the rest of the world, the Treasury said.

According to the Treasury, the investor distribution “represents a resounding success in building a more diversified investor base for South Africa and further demonstrates confidence by investors in the government’s ability to maintain its sustainable macro-economic policy framework coupled with prudent fiscal management”.

South Africa is likely to remain among the top recipients of FDI to the continent in 2014 with $4.8bn, Out-Law quoted  the ‘Africa Economic Outlook 2014’  report.

“This is a significant transaction for the Republic of South Africa, the development of Islamic finance in Africa and the international Islamic capital markets and we are delighted to have advised the Republic on this ground-breaking sukuk issuance,” Dubai-based capital markets partner and head of the firm’s global Islamic finance practice, Anzal Mohammed told Zawya.