Daily Management Review

Saudis are planning the 3rd issue of bonds on the world market


09/25/2017


Saudi Arabia has hired banks to organize a potential issue of bonds on the international market, as the largest economy of the Persian Gulf and the world's largest oil exporter is trying to solve the budget deficit problem against the background of a fall in oil prices, Reuters reports.



Kimon Berlin
Kimon Berlin
According to the agency’s sources, Saudi Arabia can issue bonds for up to $ 10 billion. This will be the third sale of bonds on the international market.

In October 2016, Saudi Arabia placed state bonds on the international market for $ 17.5 billion, which became the largest bond issue among developing countries. In April 2017, the kingdom raised $ 9 billion in the debut sale of Islamic bonds denominated in dollars.

In addition, the Saudi Arabian government later attracted funding from local investors in the sale of sukuk bonds for a total of SAR 37 billion ($ 9.9 billion).

Raising funds is necessary to cover a significant budget deficit, which is expected to be SAR 200 billion in 2017.

According to sources, new bonds can be issued soon. The issue will be divided into three tranches: 5-year, 10-year and 30-year bonds, as follows from a document that was issued by one of the banks involved in the transaction, writes Reuters.

Goldman Sachs International, GIB Capital, HSBC, J.P. Morgan and MUFG were chosen as joint chief organizers and joint bookrunners.

In the presentation documents that the government sends to investors, Saudi Arabia, which has an "A1" rating from Moody's and "A +" from Fitch, said its fundamental economic performance "outperforms countries with similar ratings or other G20 member countries".

The government also stressed the "low level of its external debt," considering that the government's total debt was only 13.1% of GDP in 2016, and gross external debt was 4.3% of GDP last year.

It is expected that the upcoming Saudi bonds will attract huge demand from world investors interested in long-term high-yield securities on the market, which is still characterized by low interest rates in many countries.

As part of the debut international issue last year, the demand for Saudi bonds almost four times exceeded the volume of supply.

source: reuters.com






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