Kingdom plans to raise $27b via bond market

11/08/2015 05:12 AST

RIYADH — Saudi Arabia plans to auction as much as SR20 billion ($5.3 billion) as part of a program to raise a maximum of SR100 billion by the end of the year, two people familiar with the matter said last week. The government confirmed last month it already sold SR15 billion of bonds in a direct sale to private investors.

"Oil prices have given incentive for the government to issue bonds now," Mazen Al Sudairi, the Riyadh-based head of sell-side research at Alistithmar Capital, a unit of Saudi Investment Bank, said.

The debt sale "also shows the government’s confidence in its oil and development policies. We have so many infrastructure and energy projects that will need funding," he said.

Until this year, Saudi Arabia hadn’t issued securities with a maturity of more than 12 months since 2007, according to data.

Details of its recent private placement, including the price, the maturity and even the date of the sale haven’t been made public.

The government has yet to confirm the plan to raise as much as SR100 billion in 2015. "The country needs the government to issue debt instruments to develop the debt-capital market," Mohammed Al Jadaan, the chairman of the Riyadh-based Capital Market Authority, said on Sunday.

"We need it to create a risk curve that can be used to measure pricing of debt issuances by other companies." "Formation of a government yield curve is a welcome step toward independent monetary policy," Emad Mostaque, a London-based strategist at emerging-markets consultancy company Ecstrat, said.

"Even with a yield of around 1.5 percent or 2 percent, it’s more attractive than giving loans," Sajjad Hussain, a senior research analyst at Bank Al Bilad, said.

Saudi Gazette