Saudi Arabia to Offer International Investors $17.5 Billion in Bonds

Gulf countries are increasingly raising funds through international markets

The Wall Street Journal

By NICOLAS PARASIE and  CHRISTOPHER WHITTALL
Oct. 19, 2016 7:27 a.m. ET
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DUBAI—Saudi Arabia plans to raise up to $17.5 billion by selling bonds for the first time to international investors this week, two people aware of the transaction said Wednesday.

The kingdom also tightened its pricing guidance for the potential multi-tranche issue, which along with the estimated issue size reflects a strong appetite for the potential issue, bankers say.

For the five-year tranche, Saudi Arabia said it would pay around 140 basis points above U.S. Treasurys, compared with an initial guidance of around 160 basis points above U.S. Treasurys.



The 10-year tranche is now tentatively priced at around 170 basis points above U.S. Treasurys compared with around 185 basis points earlier. The indicated price for the 30-year tranche is now 215 basis points above U.S. Treasurys against around 235 basis points previously.

“It is no surprise to see high demand from both local and international investors for Saudi Arabia’s debut sovereign bond issue,” says Mohieddine Kronfol, chief investment officer at the Global Sukuk and MENA fixed income at Franklin Templeton Investments. “Initial price guidance was in line with what we were expecting.”

Saudi Arabia joins other oil exporters from the Gulf region such as Qatar, Bahrain Oman and Abu Dhabi, in increasingly raising funds through international markets to plug huge budget deficits.

The Gulf countries have introduced far-reaching reforms in response to lower oil prices, from raising taxes to cutting energy subsidies and reining in spending. The International Monetary Fund estimates that the Gulf countries still face a combined deficit of $765 billion for the next five years.

Write to Nicolas Parasie at nicolas.parasie@wsj.com and Christopher Whittall at christopher.whittall@wsj.com