Oman set for new bond sale

Sultanate is in talks to win support from some Gulf neighbours

As Oman wades back into the international debt market after more than a year, it’s seeking to boost investor confidence by raising the possibility of assistance fromits Gulf neighbours.

The sultanate is in preliminary talks to win support from some states in the region, according to its bond prospectus. Derivatives traders have pared back wagers for a devaluation of the Omani rial on anticipation that the wealthier Gulf states will come to the country’s rescue — as they did for Bahrain two years ago — if its peg to the dollar comes under threat.

Fiscal shortfall

Oman has lagged most peers in implementing fiscal reforms despite dwindling reserves and a budget deficit S& P Global Ratings estimates could reach 18 per cent of gross domestic product this year. The government is facing increasing pressure to tap global debt markets as a widening fiscal shortfall leaves the sovereign underfunded by about 1.3 billion rials ($ 3.4 billion) to 1.4 billion rials, according to Morgan Stanley.

“Given the weakness in external balances, the buyers will likely be those who ascribe a greater probability of support if it comes down to it, in the Bahrain type of model,” said Todd Schubert, head of fixed income research at Bank of Singapore.

Debt comeback

Oman plans to sell benchmark sized dollar bonds due in three, seven and 12 years - just days after S& P cut its debt rating to B+, four rungs below investment grade. While the government said it wants to introduce a delayed 5 per cent value- added tax in April, S& P said fiscal austerity measures will probably only be rolled out gradually.