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By Yousef Saba
DUBAI, June 8 (Reuters) - Oman sold $1.75 billion in
nine-year sukuk, or Islamic bonds, on Tuesday after drawing more
than $11.5 billion in orders for its second international bond
issuance this year, a document showed.
It launched the bonds at 4.875%, tightened from initial
price guidance of 5.375%-5.5%, according to the document from
one of the banks involved in the deal.
Oman, a relatively small oil producer, is one of the weakest
credits in the hydrocarbon-rich Gulf and more sensitive than its
neighbours to oil price swings, meaning it was hit especially
hard by 2020's historic price crash and the COVID-19 pandemic.
"The pricing is reflective of pent-up demand in the sukuk
space," said Abdul Kadir Hussain, head of fixed income asset
management at Arqaam Capital. The issuance was Oman's first
dollar sukuk sale since 2018.
The prospectus for the bonds, reviewed by Reuters, forecasts
a 2021 deficit of 2.23 billion rials ($5.79 billion), or 8.6% of
gross domestic product, falling to 1.66 billion rials in 2022,
605 million rials in 2023 and 165 million rials in 2024, or
5.9%, 2% and 0.5% of GDP respectively.
Oman expects it will continue to have substantial financing
needs that will be met partly through privatisations,
monetisation of government assets and "limited" use of domestic
funding sources such as government development bonds and
domestic sukuk issues, the prospectus said.
Raffaele Bertoni, head of debt capital markets at Gulf
Investment Corporation, said a lack of supply of dollar sukuk
from the region, as well as Oman's $1.5 billion bond maturity
this month, helped draw large demand for the new bonds.
The sultanate, which is the only Gulf sovereign with a
"junk" credit rating apart from Bahrain, faced what banking
sources described as lacklustre demand when it tapped the
international debt markets last year.
But higher oil prices, some progress on fiscal consolidation
and abundant global liquidity helped Oman become the first Gulf
sovereign to issue bonds this year in a deal that drew over $15
billion in demand.
It raised $3.25 billion in that bond sale in January and
later closed a $2.2 billion loan.
Oman expects its total government debt to fall from 82.7% of
gross domestic product in 2021 to 71.7% in 2024, according to an
investor presentation reviewed by Reuters.
Citi, Gulf International Bank, HSBC, Standard
Chartered, Bank ABC and Bank Muscat arranged
Tuesday's deal.
(Reporting by Yousef Saba
Editing by Andrew Heavens and Mark Heinrich)
