Analysis by Dealogic Research – Adrienn Berki

On October 19, Saudia Arabia priced a record $17.5bn debut international 3-tranche bond with 5-, 10-, and 30-year maturities. Proceeds will finance the government’s broader plans to move away from a dependency on oil.

The Middle Eastern kingdom’s coupons are between 2.375% and 4.5%, with benchmark spreads set between UST + 135bps and 210bps. Earlier this year Argentina issued a $16.5bn bond with 3-, 5-, 10-, and 30-year maturities – coupons were between 6.25% and 7.625%, and benchmark spreads set between UST + 533bps and 571bps.

MENA issuance at record levels

MENA international DCM volume and deal activity have reached YTD highs of $64.6bn and 133 deals, representing year-on-year increases of 153% and 75% respectively. Government issuance accounts for the largest proportion of volume with $40.2bn via 11 deals; while finance is the most active sector with 113 deals ($18.7bn), up from 63 deals in 2015 YTD ($14.6bn), with the majority  of deals private MTN transactions.

Largest emerging market bond

Saudi Arabia’s new issue is the largest emerging market bond on record, followed by Argentina’s $16.5bn transaction. State of Qatar also issued $9bn worth of notes in May. Emerging market international DCM volume and activity stand at YTD highs of $480.9bn and 936 deals so far this year. This is up 3% on 2014 YTD ($465.2bn) and 43% on 2015 YTD ($337.2bn). Finance leads all sectors with $158.3bn via 506 deals, followed by government debt with $146.4bn from 87 deals.

SSA bonds

Saudia Arabia’s latest transaction is also the 5th largest SSA bond on record, following 4 deals issued by Italy between October 2012 and April 2014 where bonds of €18.0bn, €17.1bn, €22.3bn and €20.6bn were sold to investors.