DUBAI- Oman sold $1.75 billion in nine-year sukuk, or Islamic bonds, on Tuesday after drawing more than $11.5 billion in orders for its second international bond issuance this year, a document showed.
It launched the bonds at 4.875%, tightened from initial price guidance of 5.375%-5.5%, according to the document from one of the banks involved in the deal.
Oman, a relatively small oil producer, is one of the weakest credits in the hydrocarbon-rich Gulf and more sensitive than its neighbours to oil price swings, meaning it was hit especially hard by 2020's historic price crash and the COVID-19 pandemic.
"The pricing is reflective of pent-up demand in the sukuk space," said Abdul Kadir Hussain, head of fixed income asset management at Arqaam Capital. The issuance was Oman's first dollar sukuk sale since 2018.
The prospectus for the bonds, reviewed by Reuters, forecasts a 2021 deficit of 2.23 billion rials ($5.79 billion), or 8.6% of gross domestic product, 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 it will continue to have substantial financing needs that will be met partly through privatisations, monetisation of government assets and "limited" use of domestic funding sources such as government development bonds and domestic sukuk issues, the prospectus said.
Raffaele Bertoni, head of debt capital markets at Gulf Investment Corporation, said a lack of supply of dollar sukuk from the region, as well as Oman's $1.5 billion bond maturity this month, helped draw large demand for the new bonds.
The sultanate, which is the only Gulf sovereign with a "junk" credit rating apart from Bahrain, faced what banking sources described as lacklustre demand when it tapped the international debt markets last year.
But higher oil prices, some progress on fiscal consolidation and abundant global liquidity helped Oman become the first Gulf sovereign to issue bonds this year in a deal that drew over $15 billion in demand.
It raised $3.25 billion in that bond sale in January and later closed a $2.2 billion loan.
Oman expects its total government debt to fall from 82.7% of gross domestic product in 2021 to 71.7% in 2024, according to an investor presentation reviewed by Reuters.
Citi, Gulf International Bank, HSBC, Standard Chartered, Bank ABC and Bank Muscat arranged Tuesday's deal.
(Reporting by Yousef Saba Editing by Andrew Heavens and Mark Heinrich) ((Yousef.Saba@thomsonreuters.com; +971562166204; https://twitter.com/YousefSaba))