Saudi Arabia sells bonds, plans $15.5 billion debt buyback

(Bloomberg) — Saudi Arabia has been selling Islamic bonds and securities, while offering to buy back some of its existing debt.

Bloomberg’s Most Read

The world’s largest oil exporter has priced a sale of $2.5 billion in sukuk bonds maturing in six years and $2.5 billion in dollar notes maturing in 10 years, paying 105 basis points and 150 basis points respectively against same-date US Treasuries, according to a person familiar with the matter who is not authorized to speak publicly and asked not to be identified. This is the kingdom’s first foray into international debt markets since November.

Meanwhile, Saudi Arabia has asked holders of its $15.5 billion in bonds due in 2023, 2025 and 2026 to present their notes for purchase by the kingdom for cash. The deadline for bidding is October 24.

“Saudi Arabia doesn’t really need the money,” said Abdul Kadir Hussain, head of fixed income asset management at Dubai-based Arqaam Capital. “It’s a good way to keep in touch with the international debt capital markets, while undertaking some liability management by setting the maturities of your debt.”

Bonds issued by Gulf Arab states have outperformed their emerging market counterparts this year, as high oil prices bolstered their fiscal and current positions. Investors are also turning to higher-rated debt amid growing fears of a global recession. Saudi Arabia is rated A1 by Moody’s Investors Service, its fourth highest rating.

The kingdom had set a price guidance of 110 basis points against treasury bills for the sukuk, down from the original price of around 135 basis points, the person said. He cut the forecast for the 10-year bond to a yield premium of about 180 basis points from 155 basis points.

BNP Paribas SA, Goldman Sachs Group Inc. and HSBC Holdings Plc are the offer’s bookrunners and dealer managers.

(Updates with offer price details in second paragraph.)

Bloomberg Businessweek’s Most Read

©2022 Bloomberg LP