Triple-Tranche Bond Issuance a Success
Saudi Arabia has successfully issued a $12 billion triple-tranche bond under its Global Medium-Term Note Issuance Program, demonstrating strong investor confidence in the Kingdom’s economic strength and long-term investment opportunities. The offering, issued by the National Debt Management Center (NDMC), was oversubscribed threefold with a total order book of $37 billion.
Bond Details
The triple-tranche bond issue included three tranches:
- $5 Billion Three-Year Bond: maturing in 2028
- $3 Billion Six-Year Bond: maturing in 2031
- $4 Billion Ten-Year Bond: maturing in 2035
Investor Confidence Reflects Economic Strength
The high level of demand for the bond reflects investor confidence in Saudi Arabia’s economic strength and its ability to meet its financing needs efficiently through international debt capital markets. This issuance is part of Saudi Arabia’s broader fiscal strategy, which aims to address an anticipated budget deficit and refinance maturing debt.
Fiscal Strategy and Vision 2030
The NDMC has been marketing international bonds in multiple tranches as part of the Kingdom’s annual borrowing plan, targeting approximately SR139 billion ($37 billion) in funding. This plan is designed to address an anticipated budget deficit of SR101 billion and refinance SR38 billion in maturing debt, showcasing Saudi Arabia’s commitment to fiscal stability as it continues its economic transformation under Vision 2030.
Accessing Global Debt Markets
Pricing for these bonds has been benchmarked against US Treasury bonds, highlighting Saudi Arabia’s strategic approach to accessing global debt markets. This move is expected to support the Kingdom’s economic growth agenda and enhance investor confidence in the Saudi economy.
Diversifying Funding Sources
The NDMC has also been exploring diverse funding sources to support the Kingdom’s fiscal objectives. In December 2023, it secured a $2.5 billion Shariah-compliant revolving credit facility with a three-year tenure, arranged with both regional and international financial institutions. This facility aligns with the NDMC’s medium-term debt strategy, aimed at diversifying funding channels while supporting Saudi Arabia’s economic growth agenda.
Debt Portfolio Projections
In January 2024, the NDMC projected the Kingdom’s total debt portfolio to reach SR1.115 trillion by the end of the year, with financing focused on servicing debt maturities and addressing the 2024 budget deficit.
Emerging as a Leading Issuer
Saudi Arabia emerged as the largest dollar debt issuer among emerging markets, excluding China, in the first half of 2024, according to Fitch Ratings. The Kingdom also became the leading global issuer of sukuk during this period, driven by substantial issuances in response to government funding needs and strategic economic projects.
Future Issuance Projections
Fitch Ratings projected a significant increase in dollar-denominated debt issuance by Saudi Arabia in 2025 as oil revenues moderate. The Kingdom’s debt capital market is expected to surpass $500 billion in outstanding debt in the medium term, driven by the financing of government giga-projects under Vision 2030, deficit funding, economic diversification efforts, and ongoing structural reforms.
Conclusion
The successful issuance of the triple-tranche bond demonstrates Saudi Arabia’s ability to access global debt markets and meet its financing needs efficiently. The Kingdom’s commitment to fiscal stability and economic transformation under Vision 2030 is expected to continue driving investor confidence in the Saudi economy. As the Kingdom continues to diversify its funding sources and explore new opportunities, it is clear that Saudi Arabia is positioning itself as a leading player in the global debt market.