Saudi Arabia draws record $67bn demand for first international bond

Saudi Arabia has reassured investors that it could stabilize state finances and reduce its dependence on oil.
Updated 20 October 2016

Saudi Arabia draws record $67bn demand for first international bond

DUBAI/LONDON: Saudi Arabia attracted massive investor demand of about $67 billion on Wednesday for its first international bond offer, as the Kingdom allayed concern about the impact of low oil prices on its finances.
A source familiar with the offer said order books had come close to the $69 billion record for an emerging markets bond issue that was set by Argentina in April this year.
Saudi Arabia expects to raise up to $17.5 billion through its bond offer, which involves five-, 10- and 30-year tranches, the source said.
Argentina set the current record for an emerging market sovereign bond sale in April, selling $16.5 billion.
The huge size of demand for Saudi debt was partly due to low global interest rates and funds’ frustration with a lack of high-yielding assets around the world.
But Wednesday’s debt sale also marked a success for Saudi Arabia in reassuring investors that it could stabilize state finances and reduce its dependence on oil. 
In the days before the sale, senior Saudi officials held a series of meetings with top investors in London and the US.
Riyadh ran a record budget deficit of $98 billion last year — 15 percent of GDP — and is struggling to cut the gap this year. It turned to the international markets to finance part of its deficit this year, easing pressure on its foreign reserves, which it has been drawing down to pay its bills.
The Saudi issue is expected to set a benchmark for the kingdom and pave the way for further international issues by the government in coming years, as well as bond sales by a string of big Saudi companies.
Mohieddine Kronfol, chief investment officer for Middle East fixed income at major asset manager Franklin Templeton Investments, said the debut issue would invigorate Saudi financial markets.
“Not only could the bond help develop the Kingdom’s debt markets by introducing a more sophisticated type of investor, but there are also positive ripple effects for Gulf Cooperation Council fixed income as well as more global investors to take a closer, and longer-term, look at the region.”
The five-year tranche was expected to be priced later on Wednesday at 140 basis points over US Treasuries plus or minus 5 bps, the source said.That is cheaper than initial price thoughts of US Treasuries plus 160 bps.
For the 10-year tranche, guidance tightened to 170 bps plus or minus 5 bps from a starting point of the plus 185 bp area.
For the 30-year, Saudi Arabia set guidance at 215 bps plus or minus 5 bps; initial price thoughts were around 235 bps.

France ready to take Trump’s tariff threat to WTO

Updated 08 December 2019

France ready to take Trump’s tariff threat to WTO

  • Macron government will discuss a global digital tax with Washington at the OECD, says finance minister

PARIS: France is ready to go to the World Trade Organization to challenge US President Donald Trump’s threat to put tariffs on French goods in a row over a French tax on internet companies, its finance minister said on Sunday.

“We are ready to take this to an international court, notably the WTO, because the national tax on digital companies touches US companies in the same way as EU or French companies or Chinese. It is not discriminatory,” Finance Minister Bruno Le Maire told France 3 television. Paris has long complained about US digital companies not paying enough tax on revenues earned in France.

In July, the French government decided to apply a 3 percent levy on revenue from digital services earned in France by firms with more than €25 million in French revenue and €750 million ($845 million) worldwide. It is due to kick in retroactively from the start of 2019.

Washington is threatening to retaliate with heavy duties on imports of French cheeses and luxury handbags, but France and the EU say they are ready to retaliate in turn if Trump carries out the threat. Le Maire said France was willing to discuss a global digital tax with the US at the Organization for Economic Cooperation and Development (OECD), but that such a tax could not be optional for internet companies.

“If there is agreement at the OECD, all the better, then we will finally have a global digital tax. If there is no agreement at OECD level, we will restart talks at EU level,” Le Maire said.

He added that new EU Commissioner for Economy Paolo Gentiloni had already proposed to restart such talks.

France pushed ahead with its digital tax after EU member states, under the previous executive European Commission, failed to agree on a levy valid across the bloc after opposition from Ireland, Denmark, Sweden and Finland.

The new European Commission assumed office on Dec. 1.