Oman govt mar­ket­ing $1bn 5-yr loan to banks

Kuwait Times - - BUSINESS -

DUBAI: The gov­ern­ment of Oman has in­vited banks to par­tic­i­pate in a $1 bil­lion sov­er­eign loan, two sources aware of the mat­ter said yes­ter­day, as the Gulf coun­try seeks funds at a time of stretched state fi­nances due to lower oil prices. The sul­tanate recorded a 2.93 bil­lion rial ($7.63 bil­lion) bud­get deficit for the first nine months of 2015, while its cen­tral bank gov­er­nor told Reuters last month it was seek­ing to re­duce spend­ing and in­crease rev­enue to cope with the cur­rent fis­cal po­si­tion.

It raised a de­but sov­er­eign Is­lamic bond worth 250 mil­lion ri­als in Oc­to­ber to help bridge the gap in its fi­nances, and now the sul­tanate is seek­ing bank fi­nance as well, ac­cord­ing to the sources, who spoke on con­di­tion of anonymity as the in­for­ma­tion isn’t pub­lic. Oman’s Fi­nance Min­istry did not im­me­di­ately re­spond to a re­quest for com­ment. The loan will be ar­ranged by Cit­i­group, Gulf In­ter­na­tional Bank and Natixis and will run for five years, the sources said.

The in­ter­est rate on the loan will be 110 ba­sis points over the Lon­don in­ter­bank of­fered rate (Li­bor), ac­cord­ing to one of the sources, a Gulf-based banker, who added that mar­ket­ing of the deal will close by the mid­dle of De­cem­ber.

The loan syn­di­ca­tion comes at a time when credit rat­ing agency Stan­dard & Poor’s down­graded Oman’s sov­er­eign debt and re­tained a neg­a­tive out­look, cit­ing risks over the next two years due to low oil prices. “Once Saudi Ara­bia was down­graded, it was ob­vi­ous that Oman and Bahrain would be down­graded as well, so peo­ple were ex­pect­ing this,” said the sec­ond source, a se­nior re­gional banker.

He was point­ing to S&P’s down­grade of Saudi, the Gulf’s largest econ­omy, last month due to pres­sure on state fi­nances. Oman has min­i­mal over­seas debt though so the loan is ex­pected to be rel­a­tively well re­ceived due to its rar­ity value and mod­est size of the trans­ac­tion, the Gulf­based banker added.

The coun­try has a pro­tracted do­mes­tic bor­row­ing pro­gram, in­clud­ing reg­u­lar trea­sury bill auc­tions, which is adding pres­sure to the liq­uid­ity in the lo­cal bank­ing sys­tem and forc­ing the gov­ern­ment to raise money abroad. The gov­ern­ment has also talked about rais­ing an in­ter­na­tional bond, which bankers ex­pect to hap­pen in 2016. —Reuters

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