Oman and State Oil Firm OQ Hire Banks for Eurobond Sales

Oman’s government has mandated banks for its first international public bond sale in over a year and state oil firm OQ may tap the market soon after.

Facing the widest budget deficits among Gulf Arab economies, the government hired HSBC Holdings Plc, Standard Chartered Plc, Citigroup Inc., Natixis SA, Societe Generale SA, Bank Muscat SAOG and First Abu Dhabi Bank PJSC for a benchmark-sized offering of dollar notes due in three, seven and 12 years.

The sultanate has considered seeking financial assistance from other Gulf countries and is in preliminary talks on possible support from some states in the region, according to a copy of the bond prospectus seen by Bloomberg.

Oman and State Oil Firm OQ Hire Banks for Eurobond Sales

OQ, formerly known as Oman Oil Co., has hired Citigroup, First Abu Dhabi Bank and Standard Chartered to arrange a sale of dollar bonds, according to two people familiar with the matter. They may be issued soon after the sovereign’s deal, according to one of the people.

Rated junk by all three major credit assessors, Oman’s finances were weak even before the pandemic broke and oil prices crashed. It’s on course to post the steepest budget deficit since 2016 at nearly 19% of gross domestic product, according to the International Monetary Fund. The economy is on track to contract 10%, the most among Arab Gulf nations, according to the IMF’s latest outlook.

On Friday, S&P Global Ratings was the latest to lower the sovereign rating for the second time this year, citing a material weakening in the Gulf country’s debt levels. Yields on the sultanate’s dollar bonds due in 2029 climbed seven basis points on Monday to 6.76%, the highest level in almost two weeks.

Oman’s gross government debt will rise to about 84% of GDP by the end of 2020 from 60% in 2019, while the debt of state-related enterprises debt will increase to the equivalent of 43% of GDP from 30% during the same period, S&P forecast.

©2020 Bloomberg L.P.

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