Gulf countries might turn towards Asset Sales to meet growing debt demands

Analysts at Citigroup Inc suggest Gulf governments might move towards asset sales to honor at least $50 billion of debt spree to support economies rocked by the coronavirus pandemic and the collapse in crude prices.

“Countries including Saudi Arabia and the United Arab Emirates have “really attractive” government-owned assets, which could be sold to the public or partnered with other investors”

“There are opportunities obviously on that front,” Mr. Atiq Rehman, Leader – EMEA Emerging Markets Cluster at Citi Group Inc shared. “There is also a high investment-grade rating for their ability to raise a substantial amount of international debt at very attractive prices. There is the capacity to borrow more.”

Gulf authorities are looking at ways to improve their economies as the coronavirus pandemic and a historic crash in oil prices add to pressure on already constrained finances. Unlike in Europe, most major entities in the region are still government-owned. Saudi Arabia last year raised $29.4 billion by selling less than a 2% stake in the world’s biggest oil producer, Saudi Aramco.

More Sales expected
Borrowers in the Gulf Cooperation Council have raised $47 billion in bonds this year, with just over half of that coming from Saudi Arabia, Qatar and Abu Dhabi in the past month itself. Franklin Templeton estimates authorities and corporations in the region could raise $105 billion in bonds this year, topping last year’s $101 billion.

More deals are expected soon. Saudi Arabia, the region’s biggest economy, is leading the way with plans to borrow a record 220 billion riyals ($58 billion) this year. Saudi Aramco is said to have hired consultants to review a possible multi-billion dollar stake sale in its pipeline business, following a similar move by government-backed Abu Dhabi National Oil Co., whose natural gas pipeline unit could be valued at $15 billion.

Citigroup has worked on some of the Gulf’s biggest deals this year, including Saudi Arabia’s and Abu Dhabi’s bond offerings. The bank is the region’s third top arranger of debt sales.

Middle Eastern wealth funds have built up assets of more than $2 trillion as a cushion for when oil runs out or revenues drop. These funds could see a decline by more than $300 million this year because of the market turbulence, according to the Institute of International Finance, the industry’s global association.