Saudi plans up to $17.5bln in first bond issue

Riyadh: Saudi Arabia plans to raise up to $17.5 billion from its first international bond issue, Bloomberg News reported on Wednesday, citing two people familiar with the offering.

It would make the Saudi issue the largest ever from an emerging-market nation, said Bloomberg News, whose sources were not identified. The figure exceeds the $15 billion which an analyst had previously told AFP could be the value of the issue.

Experts say it should attract strong buyer interest. The kingdom, the world´s largest oil exporter, projected a deficit of $87 billion this year after a fall in oil revenues, which still accounts for most of its income.  To cover the shortfall, Saudi Arabia has imposed unprecedented subsidy cuts, slowed government projects, and in September cut cabinet ministers´ salaries, among other measures.  The kingdom last week began meetings with potential investors ahead of the bond issue.

According to the sources cited by Bloomberg News, the kingdom plans to sell dollar-denominated five-year bonds yielding about 140 basis points above United States Treasuries with similar maturity.  Saudi Arabia will also issue 10-year notes and 30-year securities at a premium, the report said.

Christopher Dembik, global head of macroeconomic research at France´s Saxo Bank, told AFP the kingdom´s offer "is going to arouse strong interest on the part of investors" desperately looking for yield.

"Although the country can legitimately hope to borrow at an attractive rate, it will be certainly slightly above that of its neighbours because of its less favourable sovereign debt rating and a recent global trend towards higher sovereign rates," he said. Saudi Arabia has already issued domestic bonds but that has led to a tightening of bank liquidity, according to Patrick Dennis, lead Middle East economist at Oxford Economics in London.