Saudi Crown Prince Mohammed bin Salman. — Bloomberg
RIYADH: Saudi Arabia raised US$5bil through the sale of US dollar-denominated sukuk as it seeks to plug a hole in its finances and fund spending on Crown Prince Mohammed bin Salman’s economic diversification drive.
The kingdom sold the bonds through notes maturing in three, six and 10 years, according to a person familiar with the matter, who asked not to be identified.
The deal was priced at yields of 60 basis points more than comparable US treasuries for the shortest tranche and at 85 basis points for the longest tranche, the person said.
That’s down from initial discussions for around 85 to 110 basis points.
Saudi Arabia tapped the debt market as it works to find alternative sources of funding to help cover an expected financial shortfall of about US$21bil this year.
The country has said total funding activities for the year may reach around US$37bil, with capital that’s raised helping to accelerate projects and programmes of the so-called Vision 2030 agenda.
The latest offering follows a US$12bil sovereign debt sale by Saudi Arabia in January. The kingdom’s record year for international bond issuance came in 2017, when it sold US$21.5bil.
Citigroup Inc, Goldman Sachs Group Inc and BNP Paribas SA were bookrunners and global coordinators. Moody’s Ratings has Saudi Arabia at A1, the fifth-highest level of investment grade, with a positive outlook.
Demand for Gulf Cooperation Council sovereign bonds remains strong, after recent deals involving Abu Dhabi and Qatar, according to Apostolos Bantis, managing director of fixed income advisory at Union Bancaire Privee Ubp SA.
“The geopolitically turbulent environment in the wider Middle East region has not affected bond investor’s sentiment for high quality paper in the Gulf region,” Bantis said.
Despite rising debt levels and small financial deficits, the Kingdom’s credit profile should remain stable, supported by ongoing high oil prices, he said. — Bloomberg
