Oman in talks with banks about loan and bond

Oman is talking to international banks about raising more funds through a loan and bonds as the sultanate seeks to replenish budget coffers hit hard by low oil prices, sources familiar with the matter said on Wednesday.

The discussions are at an early stage and the government has not issued an official request for proposals, the sources said.

Oman’s ministry of finance did not immediately respond to a request for comment.

A potential solution would be for Oman to take a five-year loan initially followed by bonds with maturities of five and 10 years, one of the sources said.

The sultanate has already raised $7bn from international bonds this year. It issued a triple-tranche $5bn conventional bond in March and a $2bn sukuk, or Islamic bond, in May.

International demand for both transactions was high, with the conventional bond attracting more than $20bn in orders and the sukuk almost $7bn.

“It’s evident that the bond market is open for them,” said a banker in Dubai.

Initial discussions with banks involved lenders such as First Abu Dhabi Bank, Natixis and Standard Chartered, said one of the sources, though nothing has been finalised.

Moody’s downgraded Oman’s sovereign rating last week to Baa2 from Baa1 – two notches above S&P which rates the country at junk – and the same level as Fitch. All the three agencies have a negative outlook for Oman.

“Fiscal performance in 2016 and during the first months of 2017 has been weaker than the government’s reform announcements and oil price developments would have suggested,” Moody’s said.

Oman’s budget deficit in the first five months of the year was OMR2bn ($5.2bn), already two-thirds of the forecast deficit for 2017.

Moody’s said this meant there was an increased likelihood Oman would miss its budgetary targets for the second year in a row.