Saudi Arabia taps debt market with three-part dollar sukuk

By News Desk
May 29, 2024
Saudi Arabian currency seen in this undated image. — Reuters/file

Saudi Arabia is looking to raise money through the sale of dollar-denominated sukuk as it seeks to plug a hole in its finances and fund spending on Crown Prince Mohammed bin Salman’s economic diversification drive.


The kingdom mandated banks for a three-part offering of three-, six- and 10-year notes, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it. The bonds may yield between 85 basis points and 110 basis points more than comparable US Treasuries, the person said.Saudi Arabia is tapping the debt market as it works to find alternative sources of funding to help cover an expected fiscal shortfall of about $21 billion this year. The country has said total funding activities for the year may reach around $37 billion, with capital that’s raised helping to accelerate projects and programs of the so-called Vision 2030 agenda.

The latest offering follows a $12 billion sovereign debt sale by Saudi Arabia in January. The kingdom’s record year for international bond issuance came in 2017, when it sold $21.5 billion, according to data compiled by Bloomberg.

Citigroup Inc., Goldman Sachs Group Inc. and BNP Paribas SA are bookrunners and global coordinators. Moody’s Ratings has Saudi Arabia at A1, the fifth-highest level of investment grade, with a positive outlook.

Demand for Gulf Cooperation Council sovereign bonds remains strong, after recent deals involving Abu Dhabi and Qatar, according to Apostolos Bantis, managing director of fixed income advisory at Union Bancaire Privee Ubp SA. He expects that Saudi Arabia will raise at least $10 billion of fresh funds this time.

“The geopolitically turbulent environment in the wider Middle East region has not affected bond investor’s sentiment for high quality paper in the Gulf region,” Bantis added. Despite rising debt levels and small fiscal deficits, the Kingdom’s credit profile should remain stable, supported by ongoing high oil prices, he said.