Saudi Arabia Said to Tap JPMorgan, Citi, HSBC on Dollar Bond

  • Banks said to be global coordinators, lead arrangers for deal
  • Kingdom said to weigh a bond sale of more than $10 billion

Saudi Arabia appointed JPMorgan Chase & Co., HSBC Holdings Plc and Citigroup Inc. to arrange its first international bond sale, people with knowledge of the matter said.

The banks are acting as global coordinators on the issue, according to the people, who asked not to be identified as the decision isn’t public. More banks could be added later as joint lead arrangers and bookrunners on the deal, they said. Global coordinators have a key role in overseeing the deal while lead arrangers buy debt and sell it to other banks.

The decision on the mandates was made on Saturday night and the kingdom will probably wait until after the summer before selling the bonds, two of the people said. The nation is preparing for a sale of at least $10 billion, separate people familiar said earlier this month.

HSBC, JPMorgan, Citi and Saudi Arabia’s finance ministry declined to comment.

Saudi Arabia is poised to join other countries from the six-nation Gulf Cooperation Council tapping foreign markets to plug budget deficits. The kingdom is shoring up its finances as an era of oil-fueled abundance falters after crude prices slumped. It plans to tap international debt markets as early as September, Minister of State Mohammad bin Abdulmalik Al-Sheikh said during a meeting between Bloomberg News and the Deputy Crown Prince Mohammed bin Salman in April.

West Texas Intermediate for August delivery was at $47.56 a barrel on the New York Mercantile Exchange, down 8 cents, at 2:03 p.m. Hong Kong time after losing as much as 72 cents earlier. The contract fell $2.47 to $47.64 on Friday.

Well Received

"I expect the Saudi Arabia bond deal to be well received, albeit at a price," Anita Yadav, head of fixed-income research at Emirates NBD said by phone on Sunday. "The hunt-for-yield in a world infected with negative rates will probably see good demand for a name like Saudi Arabia that has a strong credit rating and will likely offer attractive returns."

In April, it sealed a $10 billion loan -- its first in at least 15 years -- from a group of U.S., European, Japanese and Chinese banks, people familiar with the matter said at the time. The bond sale being considered now would probably come in five-, 10- and 30-year bonds once Ramadan ends next month, separate people with knowledge of the matter said earlier in June.

To cover a budget shortfall estimated at about $100 billion this year, Saudi Arabia has been selling local debt and drawing down foreign reserves as well as raising money on international capital markets. It has also outlined an economic transformation plan that includes increasing government debt to 30 percent of economic output by 2020 from 7.7 percent.

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