Saudi Arabia to hold ‘first int’l bond sale ever’: report

Saudi Arabia is reported to be set to launch its first-ever international bond sale tomorrow, after a roadshow in the US and UK concludes on Tuesday, the Financial Times is reporting. 

The planned sale of sovereign debt is considered important because it is Saudi Arabia’s first, and because it could end up being the region’s largest ever such sale, attracting investments of as much as US$15bn, the FT noted, in a story on its website this morning. The sale could even rival “Argentina’s record-breaking US$16.5bn emerging market bond sale earlier this year”, the FT said.

The bond sale is described as the latest effort on the part of Saudi Arabia to deal with financial problems that the decline in the price of oil over the past two years has wrought on the kingdom.

Bankers involved in the sale had said that initial price guidance for the bond, believed to be between US$10bn and $15bn, would be released tomorrow, according to the FT.

“Investors who have met Saudi delegates say they expect the bonds — likely to be split into five, 10 and 30-year maturities — to be issued with a yield anywhere between 160 and 200 basis points over equivalent US government benchmarks”.

As reported here in September, Saudi Arabia, with around 16% of the world’s known oil reserves and the world’s No. 1 oil exporter, has long relied on oil to fuel its economy, and is now struggling to cope with a halving in the price of the commodity. Oil is now at around US$50 a barrel, from US$115 in 2014.

Last year the country posted a budget deficit last year estimated at around 13% of GDP, and it faces another deficit in 2016 of around US$87bn – which is why the normally change-wary Saudi government is suddenly wooing outside investors as never before, with the planned bond sale one of several measures being brought into play.  The biggest and most ambitious of the planned measures is Vision 2030, formally unveiled in April of this year and essentially a wide-ranging plan which at its heart aims to turn a country almost totally reliant on oil into a modern, diversified economy, trading globally in a number of key sectors, over the course of the next 14 years.

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