Oman hires banks for sukuk in second international debt foray of 2021

3 minute read
Register now for FREE unlimited access to Reuters.com

DUBAI, June 7 (Reuters) - Oman has hired banks for its second international bond sale of the year, a planned issuance of nine-year U.S. dollar-denominated sukuk, a document showed on Monday, as it seeks to plug a large budget deficit.

Oman hired Citi (C.N), Gulf International Bank, HSBC (HSBA.L), Standard Chartered (STAN.L), Bank ABC and Bank Muscat (BKMB.OM) to arrange investor calls starting on Monday, the document from one of the banks seen by Reuters showed. An issuance of sukuk, or Islamic bonds, will follow, subject to market conditions.

Oman, one of the weakest credits in the hydrocarbon-rich Gulf, is a relatively small oil producer and more sensitive than its neighbours to swings in the oil price, meaning it was hit particularly hard by last year's historic price crash and the COVID-19 pandemic.

Register now for FREE unlimited access to Reuters.com

It forecasts a 2021 deficit of 2.23 billion rials ($5.79 billion), or 8.6% of gross domestic product, the prospectus for the sukuk showed, 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 that it will continue to have substantial financing needs as a result of ongoing low oil prices and the continued impact of the COVID-19 pandemic, in anticipation of which, Oman is pursuing a diversified and comprehensive funding plan," the prospectus said.

Financing needs will be partly met through privatisations, monetisation of government assets and "limited" use of domestic funding sources such as government development bonds and domestic sukuk issues.

The sultanate, which is the only Gulf sovereign with a "junk" credit rating apart from Bahrain, has already raised a $2.2 billion loan and $3.25 billion through a three-part bond sale this year.

The prospectus noted Oman's interest burden is likely to increase as a result of expectations for increased external borrowing.

"Over time, maturing external debt may need to be refinanced at higher costs, especially if Oman's ratings were to be further downgraded."

($1 = 0.3850 Omani rials)

Register now for FREE unlimited access to Reuters.com
Reporting by Yousef Saba; Editing by Edmund Blair, Kirsten Donovan

Our Standards: The Thomson Reuters Trust Principles.