Debt Issuance, Saudi Size.

Investors are queuing in their dozens for Saudi Arabian debt, with the country experiencing “massive levels of demand” for their first international debt sale according to the Reuters. So much so, Riyadh is lining up a full “pipeline of bonds”, beginning with a $15billion initial auction according to bankers briefed on the sale – which could be the largest single emerging market issuance in history.

The first issue could be as early as next month according to the Financial Times, as Saudi Arabia seeks to diversify government revenue away from oil as the price of oil remains depressed.   

With deputy Crown Prince Mohammed bin Salman currently visiting Japan where he will chair the Kingdom’s G20 delegation, he is expected to discuss plans with interested parties.The Prince has been at the centre of reforming the Kingdom and untying itself from its “addiction to oil” in the next decade.

The Vision 2030 plan, spearheaded by the prince himself, is a series of plans aimed to move Saudi Arabia away from oil and towards a more service-based economy whilst generating revenues from areas like tourism and entertainment.  

These views are aligned with HSBC economists, Simon Williams and Razan Nasser, who have argued “a protracted period marked with economic declines will be unavoidable if the oil-rich gulf state doesn’t start moving towards less oil-reliant economy.”

Due to its dependence on oil, Saudi Arabia’s financial situation has meant all three major rating agencies have downgraded them. With Fitch affirming Saudi Arabia at “AA-“, with a negative outlook on Thursday.

Saudi Arabia will only spur on 2016’s issuance frenzy in emerging markets(EM) as EM government debt markets head for a record year. This is partly due to cheap funding options, allowing new countries to the market and existing experienced borrowers to refinance maturing and existing bonds. With JP Morgan estimating EM sovereigns having sold $95Billion of debt already this year, with another $15-$40 billion expected, it will rocket through 2014’s record of $106billion.

 

Picture via flickr, courtesy of Ash Carter.

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Reuters: Business News

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