Saudi Arabia Is Raising Money Again With International Bonds
The nation’s reputation as a reliable bet for debt investors has taken a hit since Jamal Khashoggi’s death
DUBAI—Saudi Arabia will seek a fresh injection of dollars by selling bonds Wednesday, banking documents show, testing the kingdom’s ability to raise new debt after the killing of journalist Jamal Khashoggi.
The Saudi bond sale would extend a borrowing spree that began in 2016 when, faced with a drop in oil income, the country turned to international debt markets to shore up its finances and bankroll its ambitious diversification efforts. In 2 ½ years, Saudi Arabia has sold over $50 billion in bonds, becoming one of the biggest issuers of debt among emerging markets.
Saudi Arabia’s reputation as a reliable bet for debt investors has taken a hit since Mr. Khashoggi’s death in the Saudi consulate in Istanbul last October at the hands of Saudi agents.
The cost of insuring against Saudi default rose in the aftermath of Mr. Khashoggi’s disappearance. A marquee investment conference in Riyadh in October was marked by high-profile cancellations in protest against the Saudi Crown Prince Mohammed bin Salman.
The bond issuance comes at a time of financial strain for Saudi Arabia. Last month, the kingdom announced record new spending, despite a decline in oil prices that would open up a wide budget deficit. Saudi Arabia’s public debt stands at around 19% of gross domestic product and officials have previously said it could grow to about 25% in 2021.
Saudi Arabia plans to issue bonds at benchmark size—meaning at least $500 million—maturing in 2029 and 2050, according to a marketing document sent by one of the arranging banks. The initial price guidance is 200 basis points over U.S. Treasurys for the 2029 tranche and 250 basis points over U.S. Treasurys for the 2050 tranche.
BNP Paribas , JPMorgan , HSBC , Citi and NCB Capital are the banks arranging the sale. Saudi Arabia is rated A1 and A+ at Moody’s and Fitch respectively.
Saudi bonds have generally generated strong demand from investors drawn to the kingdom’s financial strength underpinned by enormous oil reserves.