Clouds move over the Riyadh skyline November 17, 2013. Picture taken November 17, 2013. File Photo / Reuter
Riyadh: Saudi Arabia is selling bonds and Islamic securities, while offering to buy back some of its existing debt.
The world’s biggest oil exporter plans to sell sukuk maturing in six years and bonds due in 10, both denominated in dollars, according to a person familiar with the matter who’s not authorized to speak publicly and asked not to be identified. It’s the kingdom’s first foray into international debt markets since November.
At the same time, Saudi Arabia asked holders of its $15.5bn of bonds due in 2023, 2025 and 2026 to tender their notes for purchase by the kingdom for cash. It will announce the maximum acceptance amount after the pricing of the new securities.
"Saudi Arabia does not really need the money,” said Abdul Kadir Hussain, head of fixed-income asset management at Dubai-based Arqaam Capital. "This is a good way to keep engaged with the international debt capital markets, while undertaking some liability management in terming out its debt maturities.”
Bonds issued by Gulf Arab states have outperformed their emerging-market peers this year as elevated oil prices boost their fiscal and current-account positions. Investors are also gravitating to more highly rated debt amid growing fears of a global recession. Saudi Arabia is rated A1 by Moody’s Investors Service, its fourth-highest grade.
The kingdom set price guidance of 110 basis points over Treasuries for the sukuk, down from initial price talk of about 135 basis points, the person said. It trimmed the guidance for the bond to a yield premium of 155 basis points from about 180 basis points. The new securities may be priced on Tuesday and the tender deadline is October 24.
BNP Paribas SA, Goldman Sachs Group Inc. and HSBC Holdings Plc are the bookrunners and dealer managers for the offering.
