The government of Oman has approached banks for an international bond issue with tranches of five and 10 years as the country plugs a budget deficit caused by lower oil prices, banking sources familiar with the situation said on Tuesday.
The sultanate has asked international lenders to submit proposals for a U.S. dollar debt transaction likely to be around $1 billion or more. Banks are expected to submit their proposals by the end of this week, said the sources.
One source said the government was keeping an open mind on whether the issue would be in the form of conventional bonds or sukuk.
Oman’s undersecretary of finance Nasser al-Jashmi told Reuters: “As part of executing our funding plan, we have recently issued a request for proposals to a number of banks to act as issue managers.
“We expect to receive the proposals shortly and will finalise our selection process by end-January to start working on potential issuance later during the year.”
He added: “Our external funding plan includes issuance of both conventional bonds and sukuk, as well as a term loan from the bank market.”
The new bond deal will most likely involve banks that arranged debt issues for Oman last year, the banking sources said. That suggests banks such as Citi, National Bank of Abu Dhabi and Natixis are likely candidates as lead banks.
Oman’s budget deficit is forecast to be 3 billion rials ($7.8 billion) in 2017, according to the sultanate’s budget plan, published this week.
The finance ministry said it would cover this year’s deficit with 2.1 billion rials of international borrowing, 400 million rials of domestic borrowing and the drawdown of 500 million rials from financial reserves.
Last year, the government raised a $1 billion international syndicated loan in January and issued a five- and 10-year $2.5 billion international bond in June, followed by a $1.5 billion tap of the same bond in September.