Saudi Arabia plans first bonds in Ireland as kingdom tackles budget gap

Saudi Arabia is planning to list its first ever bonds in Ireland, as the kingdom seeks to raise cash to help plug a $87 billion (€79 billion) budget deficit this year as it grapples with low oil prices.

The Central Bank of Ireland has approved the prospectus for Saudi Arabia's so-called global medium term note programme, the most eagerly-anticipated debt sale to occur globally in years. The document has also been published on the Irish Stock Exchange website.

The sale, first mooted almost a year ago, occurs against the backdrop of a slump in oil prices from $115 a barrel in 2014 to as low as $27.88 in January. While prices have since rebounded to $52, Saudi Arabia, like other oil-rich Middle Eastern states, has been forced to rein in lavish public spending.

"There's a view that oil markets are recovering, though some people believe prices will remain range-bound between $50 and $60, while others think it may move to $70," said Job Langbroek, an analyst with stockbrokers Davy in Dublin. He added that much will depend on how oil-producing nations finalise details of an agreement reach last month to rein in oil oversupply.

Investors

Saudi Arabian officials and their bankers started to meet potential investors on Wednesday as they prepared to sell at least $10 billion in bonds maturing in five, 10 and 30 years.

Citigroup

, HSBC, JP Morgan have been hired to lead the deal, following intense competition among investment banks for the prized gig.

Bank of China, BNP Paribas, Deutsche Bank, Goldman Sachs, Morgan Stanley, Mitsubishi UFJ Financial Group and NCB Capital are also involved in the transaction. Bankers would be hopeful that being involved in a successful deal would boost their chances being hired in 2018 to help with an initial public offering of state-owned oil Saudi Arabian Oil Co (Aramco), by far the world's biggest company, which could be valued at over $2 trillion.

“At Saudi Arabia’s current production levels of 10.2 million barrels per day on average in the year ended 31st December 2015, and without taking into consideration the discovery of additional reserves or developments in the oil production process, Saudi Arabia’s oil reserves of 266.5 billion barrels will last for approximately another 70 years,” the bond prospectus said.

The country’s proven oil reserves account for almost 18 per cent of the world’s total, according to the Organisation for Petroleum Exporting Nations.

“While the oil industry has historically dominated, and continues to be the largest part of, Saudi Arabia’s economy, for the past several years Saudi Arabia has been concentrating on the diversification of its economy,” the document said. “These efforts have gained special importance in light of the onset in mid-2014 of the current low oil price environment.”