Oman announces further debt issuance

02 February 2016

Muscat to tap domestic market again

The Central Bank of Oman has announced a RO100m ($260m) development bond, to be issued on 22 February, according to local press.

The five-year bonds will have a coupon rate of 5.3 per cent a year.

A RO200m five-year bond issued in December 2014 had a coupon rate of 3 per cent a year. It was 61.2 per cent oversubscribed and had an average yield of 2.1 per cent.

Since then, liquidity conditions in Omani banks have tightened noticeably as oil prices fell and the government issued several bonds. The US Standard & Poor’s also downgraded Oman’s sovereign rating to BBB+ with a negative outlook in late 2015.

Interbank lending rates rose from 0.125 per cent in December 2014 to 0.153 per cent in November 2015, according to the central bank.

Muscat raised $1bn in an international sovereign loan, which closed in January. The five-year loan has a margin of 120 basis points above the London interbank offered rate (Libor).

In August, a five-year RO300m bond with a coupon rate of 3 per cent was oversubscribed by 20.1 per cent. The average yield rose to 2.5 per cent.

Oman’s budget forecasts a RO3.3bn ($8.6bn) deficit in 2016, to be funded by domestic and international borrowing, and drawdowns from sovereign wealth funds.

Muscat is also cutting spending and looking at alternative revenue sources such as taxation. Fuel prices have already been liberalised, and electricity and water prices are expected to rise in 2016.

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