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Saudi Arabia selling three-part bonds to replenish battered coffers

Saudi Arabia's finances revenues are expected to face further pressure this year [Getty]

Date of publication: 15 April, 2020

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Fund managers are reportedly expecting a multi-billion dollar transaction as Saudi Arabia prepares for the issuing of new bonds.

Saudi Arabia began offering a three-part dollar bond deal on Wednesday, according to a document seen by Reuters, as the kingdom seeks to replenish its coffers after recent low oil prices.

Riyadh on Sunday signed up to a landmark deal with major oil producers, agreeing to cut daily output - a move that will likely put further pressure on Riyadh's revenues.

According to the deal, Saudi Arabia and Russia will cut 2.5 million bpd each from their production of 11 million bpd in October 2018.

The Saudi ministry of finance is offering five-and-a-half-year notes at around 315 basis points (bps) over US treasuries, ten-and-a-half-year bonds at around 325 bps over, and 40-year notes at around 5.15 percent, according to Reuters.

Fund managers cited by the London-based news agency said they expect a multi-billion dollar transaction.

The debt sale, which will be concluded on Wednesday, involves Citi, Goldman Sachs, HSBC, Bank of China, Mizuho, MUFG, SMBC and Samba Capital.

Last week, neighbouring Qatar and the emirate of Abu Dhabi successfully sold a combined $17 billion of bonds.

Read also: Saudi orders restrictions on basic foodstuffs sold at supermarket, sparking fears of food shortages

Hit by coronavirus lockdowns and low prices for oil and gas, Gulf sovereign wealth funds are bringing billions of dollars back home to combat slowing economic growth.

According to the Institute of International Finance, Gulf funds could lose more than $300 billion this year.

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