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Oman prices third bond sale since October to plug deficit

Oman prices third bond sale since October to plug deficit

The largest oil exporter outside of OPEC sold $3.25bn in a three-part debt offering

Oman returned to the debt market for the third time in less than three months, taking advantage of investors’ appetite for yield to help plug the Gulf Arab region’s widest budget deficit.

The largest oil exporter outside of OPEC sold $3.25bn in a three-part debt offering.

Oman priced $1.75bn in 10-year notes at a yield of 6.25 per cent, according to people familiar with the matter, compared with an initial price target of 6.625 per cent.

It sold another $1bn in 30-year securities at 7.25 per cent, versus guidance of 7.5 per cent and initial price talk of between 7.625 per cent and 7.75 per cent.

It also tapped $500 million of its 2025 bond at 4.45 per cent; earlier guidance was for 4.625-4.75 per cent, and the initial price talk was 4.875 per cent, the people said, asking not to be identified because the details are confidential.

Oman may need to borrow about $4.2bn this year to cover a fiscal shortfall that has swelled after lower oil prices and the coronavirus pandemic battered the finances of one of the Gulf’s weakest sovereigns.

The sultanate is trying to win over investors concerned about its dwindling reserves by reducing spending and introducing a 5 per cent value-added tax this year. It also established a new government-owned energy company last year, with plans to use its largest oil block to raise debt.

Investors are worried about “execution risks” of Oman’s plans, said Abdul Kadir Hussain, the Dubai-based head of fixed-income asset management at Arqaam Capital. “The market will probably be a little skittish until it sees how things are moving on these fronts.”

Oman is also in talks to win fiscal support from some regional neighbors, easing fears about any risk of devaluation pressure on its currency peg.

The sultanate’s dollar debt jumped 11 per cent in the fourth quarter, more than triple the average 3.2 per cent gain among Gulf Arab peers, as global investors sought higher returns. Yields on the nation’s $2.75bn of bonds due in January 2048 have climbed 34 basis points to 7.08 per cent since falling to a 10-month low on January 8.

The country last raised $500m in a tap of its bonds due in 2027 and 2032 in November. It returned to international debt markets for the first time in more than a year in October, when it raised $2bn in seven- and 12-year bonds.

Citigroup, HSBC Holdings, JPMorgan Chase & Co. and Standard Chartered are the global coordinators for the latest sale, joined by Bank Dhofar SAOG, Gulf International Bank BSC, Natixis SA and QNB Capital as joint lead managers.


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