Lead Manager Confirms Saudi Arabia’s Successful Sale of $6 Billion in Two-Tranche Islamic Bonds

Saudi Arabia has successfully raised $6 billion through the sale of Islamic bonds, known as sukuk, according to a report from a lead manager. This marks the country’s second venture into the debt markets this year, despite ongoing challenges posed by low global oil prices and an uncertain macroeconomic environment.

The kingdom successfully issued $6 billion in bonds, with a $3 billion six-year tranche priced at 80 basis points over U.S. Treasuries (UST) and another $3 billion in 10-year notes at 100 bps over UST. This pricing, tighter than initially anticipated based on Monday’s guidance, was made possible by robust investor demand for the bonds.

Ahead of the launch, order books for the deal open to investors in the United States have surged to over $27 billion, as revealed in a separate bank document viewed on Monday.

Proceeds from the sale will be used for general domestic budgetary purposes.

Saudi Arabia, the world’s top oil exporter, last tapped the public debt markets in January, raising $10 billion.

High oil prices helped the kingdom tilt to its first fiscal surplus in almost a decade in 2022, but an uncertain demand outlook and macroeconomic headwinds have pushed prices lower this year.

On Tuesday, Brent crude was trading at around $75 per barrel at 1100 GMT, which is below the estimated breakeven price of $80.9 per barrel Saudi Arabia needs to balance its budget, according to the International Monetary Fund.

Saudi Arabia said it would trim oil production by 500,000 barrels per day starting this month, part of a surprise cut announced by the OPEC+ group in April.

(Reuters)