‘Oman’s international bond issue gives ample repayment time’

The five and 10-year tranche raised $2 billion and $1 billion respectively. Most long term bonds were reportedly taken up by investors in the United States while the five year tranche was more in demand with Gulf based investors.

Mubeen Khan, an Analyst and Chairman of Muscat Chapter of The Institute of Chartered Accountants of India, said that the bond sale demonstrates the confidence that international investors have in Oman’s economy.

Ample leg room

“The current international bond issuance underlines a strategic success because Oman is able to sell long term 10 years and 30 years maturity bonds that give ample leg room for the repayment,” Mubeen said.

Dr Anchan C K, International Investment and Economic Advisor in Oman, said this shows that global investors are confident of Oman overcoming the current deficit caused by the global oil price dip.

“If a global investor is buying Oman bonds, that too for a long term, then it says that they are positive about the country’s economy,” he added.

Increase exposure

“Many investors - notably in Asia, but also in the US and Europe, where interest rates are low - have been willing to increase their exposure to Gulf Cooperation Council (GCC) country sovereigns and banks, due to the high credit ratings and good yields,” Anchan added.

According to Moody’s ratings agency, containing government fiscal deficits and debt, together with faster-than-currently expected progress in diversifying the economy and government finances away from oil could lead to an upgrade in rating. Oman is currently rated Baaa1.

At the beginning of this year, Oman said it planned to cover a projected OMR3 billion budget deficit in 2017 with OMR2.1 billion of international borrowing, OMR400 million of domestic borrowing and the drawdown of OMR500 million from financial reserves.

This week’s bond sale covered over 90 per cent of the international borrowing plan. The early issuance may save money for Oman since US interest rate hikes are set to resume as soon as this month, and given the risk that credit rating agencies could lower Oman’s rating or outlook later this year.