SAUDI ARABIA RAISES US$7.5B
Khashoggi case hasn’t deterred investors from buying bonds in secondary market, says fund manager
SAUDI Arabia sold US$7.5 billion (RM30.75 billion) of international bonds on Wednesday in the first test of how much damage the brutal killing of Washington Post columnist Jamal Khashoggi has inflicted on investor appetite.
Only three months have passed since global investors — along with some of the banks managing the deal — skipped a major economic forum, here, amid broad condemnation over the murder, which some blame on Crown Prince Mohammed Salman.
While early indications showed the kingdom would have to pay up, the premium narrowed substantially as the day went by.
“Saudi is not sanctioned, so I guess in the end for investors it’s a question of price, set against perceived risks,” said Tim Ash, a London-based strategist at BlueBay Asset Management LLC.
The initial outcry over Khashoggi’s murder appeared at first as though it would stifle foreign investment into the country. The United States and Germany even said they’d rethink their arms sales.
But since BNP Paribas SA, Citigroup Inc, HSBC Holdings Plc, JPMorgan Chase & Co and NCB Capital Co started marketing the bonds on Wednesday, investors said it was more a matter of price than politics. While the offering was the kingdom’s smallest conventional one yet, it’s still big.
“It was small by Saudi standards, but big by last year’s market absorption capacity,” said Merian Global Investors fund manager Delphine Arrighi.
One US$4 billion tranche, due in 2029, priced at 175 basis points over US Treasuries, down from initial guidance of about 200 basis points. The other, a US$3.5 billion sale of 31-year debt, saw pricing narrow to 230 basis points from 250 basis points.
Meanwhile, Saudi Aramco also plans to tap the debt market in the second quarter to finance the acquisition of petrochemical giant Sabic, likely issuing its first ever international bond and disclosing its accounts in the process.
Saudi Arabian Energy Minister Khalid Al-Falih revealed the plan on Wednesday, here, adding that the company wanted flexibility in funding the Sabic deal, which could cost about US$70 billion.
That debt sale would force the world’s largest oil producer to disclose its accounts to investors for the first time since its nationalisation roughly four decades ago.
It would also have to make public details about oil reserves and operations. The kingdom took a first step in that direction on Wednesday by releasing the first audit of Aramco’s oil and gas reserves since 1980.