Saudi Arabia sold yesterday $5bn in Islamic and conventional bonds for which demand topped $26.5bn as it held its first international bond sale in almost a year.
The top oil exporter’s first bond sale since November came amid turbulent markets and heightened tensions with Washington over an Opec+ oil production cut, as Riyadh gears up to host its annual investment conference next week.
The kingdom sold $2.5bn in six-year sukuk at 105 basis points (bps) over US Treasuries (UST) and $2.5bn in 10-year bonds at 150 bps over UST, a bank document showed.
That was tightened from initial guidance of around 135 basis points (bps) over US Treasuries (UST) for the sukuk and around 180 bps over UST for the 10-year tranche.
“There has been very little Gulf sovereign issuance this year and the market sees it as a pretty safe bet when there is a lot of uncertainty elsewhere in the EM space,” said Justin Alexander, director of Khalij Economics and Gulf analyst for GlobalSource Partners. “Saudi is a fairly logical substitute for Russia and its weight in indices such as the JPMGBI (JPMorgan Government Bond Index) has been growing.”
Dino Kronfol, Franklin Templeton’s chief investment officer for global sukuk and Mena fixed income, said after initial guidance that demand should be strong with issuance in the Gulf down some 60% so far this year and concessions visible in initial price targets. “This should be enough to overcome fragile sentiment in global markets,” Kronfol had said.
Bond issuances in the Gulf have plummeted this year as the region reaps the rewards of high oil prices, with all six Gulf Co-operation Council countries expected to post surpluses, for some for the first time in years.
Issuers have also been wary of tapping the markets in a year that has been marked by volatility and as interest rates continue to rise amid an aggressive tightening cycle by the US Federal Reserve to tame decades-high inflation.
BNP Paribas, Goldman Sachs and HSBC are global coordinators and joint bookrunners on the debt sale, while Aljazira Capital, Citi, JPMorgan and Standard Chartered are passive joint lead managers and bookrunners.
Saudi Arabia’s finance ministry yesterday also invited holders of its $3bn bonds due in 2023, $4.5bn notes due in April 2025, $2.5bn bonds due in October 2025 and $5.5bn notes maturing in 2026 to tender them for cash.
The amount accepted in the tender offer will be announced following the pricing of the new bonds and sukuk, expected later yesterday.
Monday is the deadline for bondholders to participate in the tender offer and indicative results are expected next Tuesday.
Demand for the news bonds was likely supported by investors tendering their existing notes for cash buying into the new ones, market sources said.
Also raising bonds from the region yesterday were Abu Dhabi sovereign wealth fund Mubadala and Dubai’s biggest bank Emirates NBD.
Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, raised $3bn with green bonds in its debt markets debut earlier this month.
Saudi Arabia raised $3.25bn in bonds in November via sukuk and bonds, after issuing bonds worth €1.5bn in February and $5bn in January last year.
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