The government is close to hiring banks for the possible sukuk, the people said, asking not to be identified because the information is private. A spokesman for the Finance Ministry didn’t immediately respond to requests to comment.
A sale would come just weeks after drone strikes on Saudi Aramco’s facilities halved the oil giant’s output. The risk of “economic damage” from further attacks amid rising geopolitical tensions in the region was cited by Fitch Ratings as among the reasons for a downgrade to the country’s credit rating to A from A+ yesterday. That’s still one notch above S&P Global Ratings, which last week affirmed the country’s rating at A-, four levels above junk.
With one of the world’s lowest debt levels, Saudi Arabia has been one of the biggest issuers in emerging markets after a drop in oil prices prompted the government to cut spending and seek alternative sources of funding. Finance Minister Mohammed al-Jadaan has said the strikes had “zero” impact on the country’s revenue. The kingdom said in December it plans to raise about $32bn in local- and foreign-currency debt this year to help fund its budget deficit. Saudi Arabia has raised $10.9bn on international markets so far this year.
“In my view, impact on funding cost will be very low and negligible from the recent attacks,” said Sergey Dergachev, a senior portfolio manager at Union Investment in Frankfurt. “The sentiment toward Gulf Co-operation Council countries and Saudi credit has turned positive very quickly after the attacks. It shows investors don’t expect a material escalation between Saudi Arabia and Iran, allowing the kingdom to take advantage of the low sukuk supply with tight pricing.”
Emerging-market sovereign borrowers are returning to debt markets as stimulus from central banks cuts borrowing costs and investors chase yields. South Africa last week raised $5bn from its first sale since May 2018, while Abu Dhabi sold $10bn in bonds. Abu Dhabi National Energy Co, or Taqa, last week priced a $500mn 30-year at below initial targets.
A sale would come just weeks after drone strikes on Saudi Aramco’s facilities halved the oil giant’s output. The risk of “economic damage” from further attacks amid rising geopolitical tensions in the region was cited by Fitch Ratings as among the reasons for a downgrade to the country’s credit rating to A from A+ yesterday. That’s still one notch above S&P Global Ratings, which last week affirmed the country’s rating at A-, four levels above junk.
With one of the world’s lowest debt levels, Saudi Arabia has been one of the biggest issuers in emerging markets after a drop in oil prices prompted the government to cut spending and seek alternative sources of funding. Finance Minister Mohammed al-Jadaan has said the strikes had “zero” impact on the country’s revenue. The kingdom said in December it plans to raise about $32bn in local- and foreign-currency debt this year to help fund its budget deficit. Saudi Arabia has raised $10.9bn on international markets so far this year.
“In my view, impact on funding cost will be very low and negligible from the recent attacks,” said Sergey Dergachev, a senior portfolio manager at Union Investment in Frankfurt. “The sentiment toward Gulf Co-operation Council countries and Saudi credit has turned positive very quickly after the attacks. It shows investors don’t expect a material escalation between Saudi Arabia and Iran, allowing the kingdom to take advantage of the low sukuk supply with tight pricing.”
Emerging-market sovereign borrowers are returning to debt markets as stimulus from central banks cuts borrowing costs and investors chase yields. South Africa last week raised $5bn from its first sale since May 2018, while Abu Dhabi sold $10bn in bonds. Abu Dhabi National Energy Co, or Taqa, last week priced a $500mn 30-year at below initial targets.
