Western banks support Saudi bond issue worth $7.5B after Khashoggi's death

Published 11.01.2019 01:00
Updated 11.01.2019 08:00

Saudi Arabia sold $7.5 billion in bonds, attracting support from international investors in the kingdom's first debt sale since the murder of Washington Post columnist Jamal Khashoggi on Oct. 2, 2018.

Several high-profile Western banks including BNP Paribas, Citigroup, JPMorgan and HSBC participated alongside Saudi Arabia's largest asset manager NBC Capital.

The dollar bonds sold on Wednesday mature in both 2029 and 2050 and attracted $27 billion of orders. The kingdom will pay a yield of 4.48 percent on the bonds maturing in 2029 and 5.32 percent on the 2050 bonds. The kingdom has received major condemnation over the killing of Khashoggi and some of the banks preferred to ditch an important economic forum in Riyadh amid international outcry. Since BNP Paribas, Citigroup, HSBC, JPMorgan, and NCB Capital started marketing the bonds on Wednesday, investors said it is more a matter of price than politics. While the offering was the kingdom's smallest conventional one yet, it was still big, attracting $27.5 billion in bids.

Suffering from a slump in oil prices, the kingdom has been relying on global bond investors to help finance its budget deficit, raising $52 billion in sales since a 2016 debt debut.

Since there are no sanctions on the kingdom, investors are evaluating the prices and perceived risks, Timothy Ash of London-based BlueBay Asset Management told Bloomberg.

The kingdom's bonds took a beating after Khashoggi. The murder and oil prices slump into a bear market in the fourth quarter battered Saudi Arabia's securities, making them among the worst performers in the Gulf Cooperation Council (GCC). Saudi Arabia is rated A1 and A+ by Moody's and Fitch, respectively.

According to a statement by Saudi Finance Minister Mohammed Al-Jadaan last month, the kingdom plans to sell about $32 billion of local- and foreign-currency debt this year to help finance its deficit. The budget deficit is forecast to stand at 4.2 percent of the gross domestic product (GDP). The Saudi kingdom's budget for this year forec

asts public debt of 678 billion rials ($181 billion), or 21.7 per cent of gross domestic product, compared with 560 billion rials ($150 billion) or 19.1 per cent of GDP in 2018.

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