Saudi hires banks for int’l bond

dubai — Saudi Arabia has hired banks to arrange a global investor call ahead of a potential international bond issuance, as the Gulf’s largest economy, and the world’s top oil exporter, tries to plug a budget deficit caused by lower oil prices.

Saudi Arabia could issue up to $10 billion, banking sources said, in what would be its third international bond sale after a $17.5 billion debut international bond last year and a $9 billion sukuk, or Islamic bond, issued in April. In addition to the international debt markets, the Saudi government has recently raised debt financing from local investors through three monthly domestic sukuk sales started in July, which totalled 37 billion riyals ($9.9 billion).

The fundraising exercises are needed to cover a large budget deficit projected at 200 billion riyals for 2017. The new international bond, a 144A/Regulation S senior unsecured transaction, could be issued as soon as this week, sources said. It is split into three tranches: a long-five year tranche, a long-10 year one and a 30-year tranche, a document issued by one of the banks leading the deal showed on Monday. Goldman Sachs International, GIB Capital, HSBC, J.P. Morgan and MUFG have been appointed as joint lead managers and joint bookrunners.

In the presentation documents that the government made available to fixed income investors, and reviewed by Reuters, Saudi Arabia, rated A1 by Moody’s and A+ by Fitch, said its economic fundamentals are “superior to those of its rating peers or other G20 members.”