(Bloomberg) — Saudi Arabia is on track to sell a €1.5 billion ($1.58 billion) debut green euro bond after drawing in €7.25 billion of investors bids as it seeks to fund its ambitious economic-transformation plan.
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The pricing level for the seven-year green note has been tightened by 40 basis points compared to initial levels, according to a person familiar with the matter, who asked not to be identified discussing private information. It is set to price at 115 basis point over the benchmark.
The transaction, the first such trade from a sovereign in the Middle East and North Africa, is being sold alongside a €750 million 12-year conventional bond that is expected to price at 145 basis points over mid-swaps, the person said. Books on that tranche are over €2.7 billion.
“Their appetite to borrow is big, and market is currently happy to fund them at decent spreads,” said Mohammad Ahsan, managing director at Mashreq Bank Psc.
The green offering is a first for the Saudi central government as the world’s top crude-oil exporter looks to reach net zero emissions by 2060. The Saudi sovereign wealth fund known as the PIF started issuing green debt in 2022.
For Mehdi Popotte, a senior portfolio manager at Arqaam Capital, Saudi Arabia’s debt management strategy shows a coordinated effort to diversify from oil.
Investors have been able to buy sovereign green debt from the Middle East and North Africa, albeit in dollars. Qatar, Israel and Egypt have been among the issuers of such debt. Saudi Arabia’s offering is the first in euros from a regional sovereign, according to data compiled by Bloomberg.
Proceeds from the sale are expected to help fund projects that drive the kingdom’s sustainability agenda, which includes planting 10 billion trees and protecting 30% of Saudi Arabia’s land and sea by 2030.
The sale is the latest from the kingdom in a flurry of offerings being done to help plug an expected budget deficit. The government has forecast fiscal shortfalls through at least 2027 as it prioritizes spending on Crown Prince Mohammed bin Salman’s drive to diversify the economy away from oil.
The Saudi sovereign sold $12 billion of notes last month and the PIF, tasked with driving much of the diversification push, has also been an active borrower.
