Saudi Arabia plans debt sale, $15.5b bond buyback

Saudi Arabia is selling bonds and Islamic securities, while offering to buy back as much as $15.5 billion of debt.

The world’s biggest oil exporter plans to sell sukuk maturing in six years and bonds due in 10, both denominated in dollars, according to a person familiar with the matter who’s not authorized to speak publicly and asked not to be identified. 

At the same time, Saudi Arabia asked holders of its bonds due in 2023, 2025 and 2026 to tender their notes for purchase by the kingdom for cash. It will announce the maximum acceptance amount after the pricing of the new securities.

“Saudi Arabia does not really need the money,” said Abdul Kadir Hussain, head of fixed-income asset management at Dubai-based Arqaam Capital. “This is a good way to keep engaged with the international debt capital markets, while undertaking some liability management in terming out its debt maturities.” 

Bonds issued by Gulf Arab states have outperformed their emerging-market peers this year as elevated oil prices boost their fiscal and current-account positions. Investors are also gravitating to more highly rated debt amid growing fears of a global recession. Saudi Arabia’s debt is rated A1 by Moody’s Investors Service, its fourth-highest grade. 

Saudi Arabia is offering the sukuk at a spread of about 135 basis points over Treasuries and the bond at a yield premium of about 180 basis points, the person said. The new securities may be priced on Tuesday and the tender deadline is Oct. 24.

BNP Paribas SA, Goldman Sachs Group Inc. and HSBC Holdgings Plc are the bookrunners and dealer managers for the offering.  – BLOOMBERG