Oman has become the latest Middle Eastern sovereign to tap the markets after Abu Dhabi hit the markets in April with a US$5bn Eurobond, followed by Qatar with US$9bn in May.
The sovereign, which last issued a bond on the international markets in 1997, raised a much smaller amount than its GCC neighbours at US$2.5bn, split between a US$1bn 5-year tranche at MS+245bp and a US$1.5bn 10-year part priced at MS+320bp.
Pricing was tightened from IPTs of around the mid to high 200bp area for the US$1bn tranche and from the mid 300bp area for the US$1.5bn tranche.
“The issuance’s size is relative to the funding requirements of the Omani government,” said Fabio Scacciavillani, Chief Economist of Oman Investment Fund.
The proceeds of the bond would be used to fund a budget shortfall in the order of OMR3.3bn (roughly US$8bn to US$9bn) according to Scacciavillani.
Both Qatar and Abu Dhabi were able to issue larger amounts than Oman, in part because they are well-known to investors. Oman kept the final bond size comparably low as it would have to pay a larger premium with anything more substantial.
“The bond size that Oman issued was representative of a new issuer to the markets, as they would likely try to keep the issue size reasonably small so they do not price too wide,” said Walid Haram, Head of EM Credit Trading CEEMEA at Nomura.
Other Omani issuers appear to be gearing up to access the markets after the sovereign, with Oman Oil and PDO looking to tap the markets. The former is planning to extend a US$1.85bn loan facility, whilst the latter is looking at signing a US$2.5bn loan.
“Quasi-sovereign issuers in Oman have the ability of either issuing bonds or going to the loan markets, which will likely depend on the tenor and how much information they want to disclose about the deal,” noted Haram.
Although bond markets remain the preserve of large corporates and quasi-sovereigns, medium-sized companies will likely rely on regional and domestic bank funding according to Scacciavillani.
“There might however be a reluctance to borrow with clouds on the horizon.”