Saudi may increase $10B loan
riyadh — Saudi Arabia is considering increasing the size of a $10 billion loan after banks on the 2016 deal offered to lend more, people familiar with the matter said.
Lenders are in talks with the government to increase the amount it borrowed, said the people, asking not to be identified because the discussions are private. Another option being discussed is to arrange new bilateral or club facilities with the banks, they said.
The kingdom could add as much as $5 billion to the loan, one of the people said. Final decisions haven’t been made and discussions may not result in a new deal, the people said.
The world’s biggest oil exporter plans to borrow about $31 billion this year to bridge an expected budget deficit of $52 billion and fund growth plans after its economy shrank last year. Saudi Arabia raised about $36 billion last year, including $14 billion of domestic bonds and $22 billion from international debt markets.
In 2016, the government borrowed the $10 billion loan from banks including HSBC Holdings, JPMorgan Chase & Co. and Bank of Tokyo Mitsubishi. It was the country’s first loan for at least 15 years.
Aramco seeks cheap loans
Saudi Aramco is working to secure billions of dollars in cheap loans from banks seeking to strengthen their ties with the oil giant before its stock listing, banking and export credit agency (ECA) sources said.
Citigroup (Citi), Standard Chartered and Sumitomo Mitsui Banking Corporation were advising on the transactions, which two sources said could raise at least $5 billion to $6 billion, all with ECA-backing.
The bid to raise funds is the latest indication of Saudi Arabia’s push to ensure what could be the world’s biggest initial public offering (IPO) goes ahead in 2018, despite market speculation that sale plans might be delayed or even shelved.
The loans will offer slim returns — probably less than one per cent a year — but the sources said the banks hoped to position themselves for more work as the kingdom proceeds with selling up to five per cent of Aramco in an IPO that could value the firm at $2 trillion.
For its part, Aramco wants to leverage its balance sheet before the IPO, after which it could face higher costs because, once listed, it would cease to be a solely stateowned entity benefitting from cheap funds available to sovereign borrowers. — Bloomberg, Reuters