Saudi Arabia Raises Size of 2016 Syndicated Loan to $16 Billion

(Bloomberg) -- Saudi Arabia said it’s increasing a $10 billion syndicated loan by $6 billion as the biggest Arab economy steps up borrowing to plug its budget deficit.

Existing holders and new banks showed “an exceptional response,” the debt management office of the ministry of finance said in an e-mailed statement on Friday. The new $16 billion loan will be priced “at a margin representing a 30 percent reduction from levels set in 2016,” it said.

The previous five-year loan carried a spread of 120 basis points over Libor, according to data compiled by Bloomberg.

The world’s biggest oil exporter plans to borrow about $31 billion this year to bridge an expected budget deficit of $52 billion and fund growth plans after its economy shrank last year. Saudi Arabia raised about $36 billion last year, including $14 billion of domestic bonds and $22 billion from international debt markets.

The improved terms are a “recognition of the strengthening of the Saudi economy,” Finance Minister Mohammed Al Jadaan said in the statement. It is also a step in “achieving a prominent position for the kingdom in the international financial markets.”

The debt office is currently finalizing the documentation process for the transaction and intends to close the financing by mid-March. A significant Islamic tranche will also be introduced in the deal, it said.

In 2016, the government borrowed the $10 billion loan from banks including HSBC Holdings Plc, JPMorgan Chase & Co. and Bank of Tokyo Mitsubishi UFJ. It was the country’s first loan for at least 15 years.

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net.

To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Christian Baumgaertel, Andrew Blackman

©2018 Bloomberg L.P.