Saudi Arabia Bond Market Issuance Story by Bloomberg


By Arif Sharif and Archana Narayanan
(Bloomberg) — Saudi Arabia is planning to raise as much as
$17.5 billion in the biggest bond sale ever from an emerging-
market nation, according to two people with knowledge of the
offering, as it seeks to shore up finances battered by the slide
in oil.
The government aims to sell dollar-denominated bonds due in
five years yielding about 140 basis points more than similar-
maturity U.S. Treasuries, 10-year notes at a spread of about 170
basis points and 30-year securities at 215 basis points, the
people said, asking not to be identified because the information
is private.
The sale would eclipse Argentina’s $16.5 billion offering
in April as the largest from a developing nation, underlining
the deepening strain on an oil-dependent country that has
eschewed international debt markets until now. The nation
clocked up a budget shortfall of $97 billion last year, equal to
15 percent of its gross domestic product, prompting the
government this year to cut subsidies, wages and spending.
“Boom, they went full scale,” said Angelo Rossetto, a
trader at GMSA Investments Ltd. in London, who is bidding for
the bonds. They “probably want to take advantage of the window
before elections and possible rate increase. Print a lot now and
then see what unfolds,” he said.
The offering followed a week of presentations to
prospective buyers, taking in London, Los Angeles, Boston and
New York, at which officials emphasized the kingdom’s efforts to
diversify the $650 billion economy away from oil. Attendees such
as Gregory Saichin, chief investment officer for emerging-market
bonds at Allianz Global Investors in London, were concerned the
Saudi delegation avoided discussion of crude prices. Others
simply decided the bonds were being touted at too high a price.
“I imagine they have enough sovereign wealth fund and
cross-over investors sewn up to justify the expensive pricing,”
Edwin Gutierrez, the head of emerging-market sovereign debt at
Aberdeen Asset Management in London, which oversees more than
$400 billion, said before the final pricing Wednesday. “I can
find cheaper bonds elsewhere.”

Sales Spree

Saudi Arabia had been expected to raise about $10 billion
in the sale, people familiar with the matter said last month.
Citigroup Inc., HSBC Holdings Plc and JPMorgan Chase & Co. were
joint global coordinators for the deal. Bank of China Ltd., BNP
Paribas SA, Deutsche Bank AG, Goldman Sachs Group Inc., Morgan
Stanley, Mitsubishi UFJ Financial Group Inc. and NCB Capital
also helped manage the issue.
The offering is the latest in a series from the six-nation
Gulf Cooperation Council. Even before the Saudi sale, issuance
this year rose to an unprecedented $48.4 billion. Qatar sold $9
billion in May, a Middle East record until the Saudi issue, the
emirate of Abu Dhabi raised $5 billion in April, and Oman issued
$4.5 billion.
Saudi Arabia had $73 billion direct government debt as of
the end of August, $63 billion of which was raised from monthly
sales of local currency debt. The riyal offerings and a drop in
deposits have tightened liquidity in Saudi banks, prompting
lenders to raise interest rates they charge one another for
loans. The three-month Saudi Interbank Offered Rate, or Saibor,
has climbed for 15 straight months, rising to the highest level
in more than seven years, according to data compiled by

–With assistance from Lyubov Pronina.