Vehicles cross the Saudi Arabian border from Qatar for the first time since mid-2017.
Oman is back in 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 is selling $3.25 billion in debt in three parts.
Oman may need to borrow about $4.2 billion 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% 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% in the fourth quarter, more than triple the average 3.2% gain among Gulf Arab peers, as global investors sought higher returns. Yields on the nation’s $2.75 billion of bonds due in January 2048 have climbed 34 basis points to 7.08% since falling to a 10-month low on Jan. 8.
The country last raised $500 million 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 $2 billion in seven- and 12-year bonds.
Citigroup Inc., HSBC Holdings Plc, JPMorgan Chase & Co. and Standard Chartered Plc 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.