Saudi plans to is­sue $32bn bonds as Gulf ten­sions ease

Muscat Daily - - BUSINESS -

Dubai, UAE - Saudi Ara­bia was set to is­sue its first Eu­robond of the year as ten­sions in the Mid­dle East over the US’s as­sas­si­na­tion of Ira­nian com­man­der Qassem Soleimani ease.

The king­dom is tak­ing ad­van­tage of low bor­row­ing costs glob­ally and look­ing to plug part of its grow­ing bud­get deficit by is­su­ing around US$32bn of ex­ter­nal debt over the course of the year.

Tues­day’s deal was set to be made up of three dol­lar tranches, ac­cord­ing to peo­ple with knowl­edge of the mat­ter, who asked not to be iden­ti­fied be­cause they’re not autho­rised to speak about it. The coun­try set ini­tial price guid­ance of about 110 ba­sis points over US trea­suries for a seven-year of­fer­ing, 135 ba­sis points for a 12-year security and 180 ba­sis points for a 35-year bond, which will be Saudi Ara­bia’s long­est yet.

Saudi fixed-in­come as­sets have been more re­silient than those else­where in the Mid­dle East fol­low­ing Soleimani’s killing on Jan­uary 3. While the kind­gom’s spreads spiked that day, they’ve since fallen back to 133 ba­sis points over US trea­sures, around where they be­gan the year, ac­cord­ing to JPMor­gan Chase & Co in­dexes. Saudi Ara­bia’s sovereign dol­lar bonds have gained 0.6 per cent in 2020, more than those of any other coun­try in the Gulf Co­op­er­a­tion Coun­cil.

“While re­main­ing fully cog­nisant of the se­ri­ous na­ture of the geopo­lit­i­cal risks of late, in­sti­tu­tional in­vestors are likely to show strong de­mand for this deal,” said Cha­van Bhogaita, head of strat­egy at First Abu Dhabi Bank, who’s based in the emi­rate. There’s a ‘wall of cash that in­vestors need to put to work’ and Saudi Ara­bia ‘ticks all the boxes’, he said.

Cit­i­group Inc, Mor­gan Stan­ley and Stan­dard Char­tered Plc are lead­ing the trans­ac­tion. BNP Paribas SA, HSBC Hold­ings Plc, JPMor­gan Chase & Co and NCB Cap­i­tal are also help­ing to sell it.

Saudi Ara­bia last sold Eu­robonds in Oc­to­ber, when it raised a US$2.5bn sukuk. Fa­had al Saif, head of the king­dom’s debt man­age­ment of­fice, had said in De­cem­ber the coun­try would prob­a­bly soon re­turn to global debt mar­kets. It is­sued US$13.4bn of euro and dol­lar bonds last year, more than any other emerg­ing mar­ket aside from Turkey, ac­cord­ing to data com­piled by Bloomberg.

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