Oman issues bonds worth $3 bn

MUSCAT: The Sultanate’s government has returned to conventional bond market after 18 months with the successful issue of a $ 3 billion dual tranche ($ 750 million for five-year bonds and $ 2.52 billion for 10-Years).
The Sultanate’s government bonds saw considerable response from investors from around the world after being listed on the Euronext stock exchange in Dublin. The return on this issue was 4.95 per cent on a maturity period of 5.5 years and 6 per cent for a 10-year maturity. This represents 312 and 401.2 basis points on the average US bid and demand on the two issues, respectively.
The government has managed to create a strong demand from investors through the strategy of continuous communication with potential investors, as a result of the strengthening of the credit rating of the Sultanate with the demand record peaking at $13.6 billion and the largest-ever volume of demand for each segment peaking at over $5 billion and $8.6 billion for the 5.5-year and 10-year bonds. The large response reflects interest by investors from the world over.
The regional distribution of investors for the 5.5-year bonds was 45 per cent from Europe, 39 per cent from the US, 11 per cent from Asia and 5 per cent from the Middle East and North Africa region. The 10-year bonds saw a response of 51 per cent from Europe, 34 per cent from US, 11 per cent from Asia and 4 per cent from the Middle East and North Africa region.
The high demand for the Sultanate’s bonds is due to the great response of international bond investors. They were convinced about the strength of the Sultanate’s economy and its commitment to maintaining robust macroeconomic fundamentals to ensure sustainable growth.
The success of the bond issue can be attributed to the suitable timing of offering bonds just before the summer lull and the strong financial performance of the Sultanate over the first five months of 2019.
This issue also enabled a review of the liquidity price index of the Sultanate, where the volume of bonds offered ($3 billion) led to significantly narrow prices between insurance premiums and redistribution levels.
The government’s plan to issue bonds this year is one of the main reasons for the strong investor response in addition to the fact that the Sultanate has entered the bond market at a time of improved overall fiscal situation.
The government expects the development of the domestic bond market after 2019 to reduce the Sultanate’s reliance on global bond markets to meet financing requirements.
The government of Oman has reiterated its commitment to continue efforts to control the financial situation by laying down a strategy to reach a balanced budget in the medium term.
Nasser bin Khamis al Jashmi, Secretary-General of the Ministry of Finance said: “The Sultanate is on the right path for the third consecutive year with a drop in the deficit helped by an improvement in oil prices, while curbing spending growth at the same time. For example, government wage expenditure has remained unchanged over the past three years.”
With regard to the government’s financing strategy, the Secretary-General of the Ministry of Finance explained that the government is unlikely to return to the global bond market this year, stressing that the budget is in good shape and other sources of financing have been used.
“The government was able to raise more than $2 billion from net revenues of the government and OOC through selling a small share of the Sultanate’s assets in the gas pipeline project and other shares in some upstream projects thereby reducing the need for the bond market. Similarly, privatisation and asset monetisation are currently under way and are expected to yield positive results in late 2019 and during 2020. — ONA