PHOTO
* Investor roadshows start this week
* Prospectus very detailed on reforms, figures through 2015
* But few up-to-date numbers on impact of fiscal measures
* No explicit reference to U.S. Congress vote on Sept. 11 suits
* Skates over turmoil in Saudi construction sector
By Andrew Torchia and Davide Barbuscia
DUBAI, Oct 11 (Reuters) - The prospectus for Saudi Arabia's first sovereign international bond issue offers a mass of detail on the kingdom's economic plans but skirts risks that investors are likely to question Saudi officials about in coming days.
There is no explicit reference to last month's U.S. Congress vote to allow relatives of victims of the Sept. 11 attacks to sue Saudi Arabia. The prospectus skates over severe financial problems in the Saudi construction sector, which has brought some firms near collapse, hurting their bank creditors.
Saudi officials will meet investors from Wednesday to discuss Riyadh's plan for a U.S. dollar-denominated bond issue with five-, 10- and 30-year tranches - one of this year's biggest events in the emerging market debt industry.
As the world's top oil exporter seeks to finance a budget deficit caused by low crude prices, bankers have said the issue could total at least $10 billion and might be close to Argentina's $16.5 billion issue in April, the biggest emerging market sovereign debt sale in history.
A roadshow for investors will be held in London on Wednesday and Thursday before three days of meetings in the United States that will end on Oct. 18 in New York.
The 220-page prospectus for the sale, seen by Reuters on Tuesday, includes what may be the most comprehensive description so far of the secretive kingdom's effort to cut its dependence on oil revenues and diversify into non-oil industries.
The document contains pages of economic data up to the end of 2015 - most or all of it already publicly released - and lists a series of risks as the government tries to wrestle down last year's record $98 billion budget deficit.
They include any further fall in oil prices, the danger that state spending cuts could fail to have enough impact on the deficit or cause excessive damage to the economy, and the risk that the government could become unable to invest enough in diversifying the economy, the prospectus says.
But the document has little up-to-date information on how public finances are actually faring so far in 2016 - a key question for many investors. It repeats 2016 budget forecasts made last December, including a forecast that the deficit will fall to $87 billion this year, but does not comment on whether that number still looks likely.
"The area of fiscal policy is where there is most interest and that's still stuck at the annual figures, and apart from anecdotal evidence we don't know how quickly they are implementing reforms," said Patrick Dennis, lead Middle East economist at Oxford Economics in London.
"We had a lot of announcements of austerity on public wages being cut, or hirings being frozen and cabinet pay cuts, but we have no data to show how much government spending has been cut."
CURRENCY
The prospectus acknowledges the risk that weak finances could eventually push Saudi Arabia into abandoning the riyal's peg of 3.75 to the U.S. dollar. It says the central bank remains committed to keeping the currency peg, but that:
"There can be no assurance that future unanticipated events, including an increase in the rate of decline of the government's reserve assets, will not lead the government to reconsider its exchange rate policy."
Other issues receive less attention. Some fund managers consider the U.S. Congress vote on Sept. 11 lawsuits a significant source of risk that could deter some U.S. buying of the bond and add as much as 20 basis points to its pricing.
Riyadh has denied longstanding suspicions that it backed the hijackers who attacked the United States in 2001; 15 of the 19 hijackers were Saudi nationals.
The prospectus does not mention the legislation, though it notes in general terms that U.S. courts can hear civil claims against a foreign state for injuries, death or damages.
"The U.S. federal courts have exclusive jurisdiction over certain claims against foreign states. Where such exclusive jurisdiction does not exist a foreign state may "remove" any suit brought against it in state courts to the U.S. federal courts," the document adds.
Receiving no mention is turmoil in Saudi Arabia's construction industry, where state spending cuts and months-long delays in some payments by the government have brought some companies near financial collapse. Tens of thousands of foreign construction workers have been laid off this year and thousands more have not been paid for months, causing work stoppages.
The section of the prospectus on the construction sector does not discuss this, merely noting that growth in the sector slowed slightly to 5.6 percent last year.
(Additional reporting by Sujata Rao in London; editing by Ralph Boulton) ((andrew.torchia@thomsonreuters.com; +9715 6681 7277; Reuters Messaging: andrew.torchia.thomsonreuters.com@reuters.net))
* Prospectus very detailed on reforms, figures through 2015
* But few up-to-date numbers on impact of fiscal measures
* No explicit reference to U.S. Congress vote on Sept. 11 suits
* Skates over turmoil in Saudi construction sector
By Andrew Torchia and Davide Barbuscia
DUBAI, Oct 11 (Reuters) - The prospectus for Saudi Arabia's first sovereign international bond issue offers a mass of detail on the kingdom's economic plans but skirts risks that investors are likely to question Saudi officials about in coming days.
There is no explicit reference to last month's U.S. Congress vote to allow relatives of victims of the Sept. 11 attacks to sue Saudi Arabia. The prospectus skates over severe financial problems in the Saudi construction sector, which has brought some firms near collapse, hurting their bank creditors.
Saudi officials will meet investors from Wednesday to discuss Riyadh's plan for a U.S. dollar-denominated bond issue with five-, 10- and 30-year tranches - one of this year's biggest events in the emerging market debt industry.
As the world's top oil exporter seeks to finance a budget deficit caused by low crude prices, bankers have said the issue could total at least $10 billion and might be close to Argentina's $16.5 billion issue in April, the biggest emerging market sovereign debt sale in history.
A roadshow for investors will be held in London on Wednesday and Thursday before three days of meetings in the United States that will end on Oct. 18 in New York.
The 220-page prospectus for the sale, seen by Reuters on Tuesday, includes what may be the most comprehensive description so far of the secretive kingdom's effort to cut its dependence on oil revenues and diversify into non-oil industries.
The document contains pages of economic data up to the end of 2015 - most or all of it already publicly released - and lists a series of risks as the government tries to wrestle down last year's record $98 billion budget deficit.
They include any further fall in oil prices, the danger that state spending cuts could fail to have enough impact on the deficit or cause excessive damage to the economy, and the risk that the government could become unable to invest enough in diversifying the economy, the prospectus says.
But the document has little up-to-date information on how public finances are actually faring so far in 2016 - a key question for many investors. It repeats 2016 budget forecasts made last December, including a forecast that the deficit will fall to $87 billion this year, but does not comment on whether that number still looks likely.
"The area of fiscal policy is where there is most interest and that's still stuck at the annual figures, and apart from anecdotal evidence we don't know how quickly they are implementing reforms," said Patrick Dennis, lead Middle East economist at Oxford Economics in London.
"We had a lot of announcements of austerity on public wages being cut, or hirings being frozen and cabinet pay cuts, but we have no data to show how much government spending has been cut."
CURRENCY
The prospectus acknowledges the risk that weak finances could eventually push Saudi Arabia into abandoning the riyal's peg of 3.75 to the U.S. dollar. It says the central bank remains committed to keeping the currency peg, but that:
"There can be no assurance that future unanticipated events, including an increase in the rate of decline of the government's reserve assets, will not lead the government to reconsider its exchange rate policy."
Other issues receive less attention. Some fund managers consider the U.S. Congress vote on Sept. 11 lawsuits a significant source of risk that could deter some U.S. buying of the bond and add as much as 20 basis points to its pricing.
Riyadh has denied longstanding suspicions that it backed the hijackers who attacked the United States in 2001; 15 of the 19 hijackers were Saudi nationals.
The prospectus does not mention the legislation, though it notes in general terms that U.S. courts can hear civil claims against a foreign state for injuries, death or damages.
"The U.S. federal courts have exclusive jurisdiction over certain claims against foreign states. Where such exclusive jurisdiction does not exist a foreign state may "remove" any suit brought against it in state courts to the U.S. federal courts," the document adds.
Receiving no mention is turmoil in Saudi Arabia's construction industry, where state spending cuts and months-long delays in some payments by the government have brought some companies near financial collapse. Tens of thousands of foreign construction workers have been laid off this year and thousands more have not been paid for months, causing work stoppages.
The section of the prospectus on the construction sector does not discuss this, merely noting that growth in the sector slowed slightly to 5.6 percent last year.
(Additional reporting by Sujata Rao in London; editing by Ralph Boulton) ((andrew.torchia@thomsonreuters.com; +9715 6681 7277; Reuters Messaging: andrew.torchia.thomsonreuters.com@reuters.net))
