Saudi Arabia gives initial price guidance for multi-tranche dollar bond

By Davide Barbuscia

DUBAI (Reuters) – Saudi Arabia has given initial price guidance for a planned multi-tranche dollar bond, a document from one of the banks leading the potential deal showed.

Citi, GIB Capital, Goldman Sachs (NYSE:) International, HSBC, and Morgan Stanley have been appointed as global coordinators for the issue. Bank of China, Industrial and Commercial Bank of China, JPMorgan Chase & Co (NYSE:), Mitsubishi UFJ Financial Group are working as joint lead managers.

The kingdom has established itself as one of the top emerging market debt issuers after it began issuing international sovereign bonds in 2016 with a $17.5 billion sale. The proceeds from the sale are being used to help fill a budget deficit caused by low oil prices.

“This transaction appears to be part of normal course of business for Saudi Arabia, we expect them to do well,” said Mohieddine Kronfol, chief investment officer of Global Sukuk and MENA fixed income at Franklin Templeton Investments.

He said the size of the deal was expected to be $4 billion.

Saudi Arabia announced the planned deal while Qatar is meeting global fixed income investors this week ahead of its first return to the international debt markets since the beginning of a diplomatic crisis last year.

The kingdom is planning to issue seven-year, 12-year and 31-year notes, all of benchmark size, which normally means upwards of $500 million, the document showed.

Fund managers said the decision by Saudi Arabia to print its bonds ahead of Qatar, and without a bond roadshow, may have been determined by concerns that the Qatar deal – expected to be sizeable – could take liquidity out of the market.

Saudi Arabia, along with the United Arab Emirates, Bahrain and Egypt, has been locked in a diplomatic spat with Qatar since June last year, with the former countries accusing Qatar of funding terrorism, an assertion Doha denies.

Initial price guidance for the seven-year notes was in the 170 basis points area over US Treasuries, for the 12-year notes in the 200 bps area over UST and in the 235 bps area over UST for the 31-year paper.

The bonds are expected to price later on Tuesday. 

Saudi Arabia will focus on issuing bonds denominated in U.S. dollars and riyals this year but consider debt sales in other currencies over the longer term, the president of the kingdom’s Debt Management Office said on Sunday.

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