DUBAI - The government of Oman has picked First Abu Dhabi Bank and Bank Muscat to coordinate a $2 billion bridge loan it is seeking to borrow from international and regional banks, according to two sources familiar with the matter.
Oman is taking out the one-year loan - which would subsequently be repaid with money raised from an international bond - to bolster state coffers hit by low oil prices and the economic downturn caused by the coronavirus crisis.
It started talks with banks for the loan in June, sources told Reuters earlier this month.
First Abu Dhabi Bank and Bank Muscat have been chosen to coordinate the deal, two sources said.
The fundraising has received good interest from banks, said one of them, and should be finalised in the coming weeks.
Oman's ministry of finance, First Abu Dhabi Bank and Bank Muscat did not immediately respond to requests for comment.
Oman, a relatively small crude oil producer burdened by high levels of debt, is more vulnerable to oil price swings than most of its wealthier Gulf neighbours.
Ratings agency Moody's downgraded it last month further into junk territory to Ba3 from Ba2, citing risks related to its financing needs and diminishing buffers.
Oman's fiscal deficit could widen to 16.9% of gross domestic product this year from a 7% deficit last year, the International Monetary Fund has estimated.
It has over $10 billion in external debt due in 2021 and 2022 that could add pressure to foreign exchange reserves if it is not rolled over.
Oman had said it planned to raise over $5 billion in debt this year to partly cover an estimated deficit of $6.5 billion, but that was before the pandemic and the oil price crash.
Should it not issue debt in the international markets, Oman may need to lean on aid from its wealthier Gulf neighbours or resort to help from the IMF, an analyst at Japan's MUFG said last week.
(Additional reporting by Saeed Azhar; Editing by Kevin Liffey) ((Davide.Barbuscia@thomsonreuters.com; +971522604297; Reuters Messaging: email@example.com))