Saudi sells third int’l bond to raise $12.5 bln

DUBAI, Sept 27, (RTRS): Saudi Arabia sold a $12.5 billion international bond on Wednesday after drawing orders worth $40 billion, as the Gulf’s biggest economy raises financing to cope with weak oil prices.

Saudi Arabia’s third sale in the international debt markets follows last year’s debut $17.5 billion bond, the largest by an emerging market, and a $9 billion sukuk, or Islamic bond, in April.

A modest oil price recovery in 2017 has improved the kingdom’s accounts, but Saudi Arabia’s foreign exchange reserves have fallen. They stood at $494 billion in July, down from $744 billion in September 2014, research firm CreditSights said.

Oil prices have risen from below $30 a barrel hit at the start of last year but remain roughly half their level mid-2014 level. Benchmark Brent is now trading around $58 a barrel.

Saudi Arabia has raised about $31.5 billion through bond sales so far this year, against a 2017 budget deficit projected at about $53 billion.

Wednesday’s issue was

split into three tranches.

The first tranche, maturing in March 2023, was $3 billion in size at 110 basis points (bps) over US Treasuries. The second, maturing in March 2028, was $5 billion at 145 bps. The third, maturing in October 2047 was $4.5 billion at 180 bps.

Fund managers said the pricing was considered attractive. “We expected initial price guidance to tighten by a quarter of a point and instead it tightened by 20 bps, definitely an attractive issuance,” said a Dubai-based investor.