(Bloomberg) -- Saudi National Bank is tapping investors for a dollar-denominated debt sale, continuing a borrowing spree by the kingdom's lenders that are helping finance a $2 trillion economic overhaul.
SNB launched the offering of a $1.25 billion Tier 2 note, with a tenor of 10 years and spread of 200 basis points over US Treasuries, according to a person familiar with the matter, who asked not to be identified discussing private information. Order books exceeded $4 billion, the person said.
The dollar bond would be the largest ever issued by SNB, Saudi Arabia's second-biggest bank by market capitalization, according to data compiled by Bloomberg.
SNB's latest foray adds to a flurry of sales by local lenders that have made Saudi Arabia an increasingly important player in the world of junior bank debt this year. Saudi banks are critical to driving Crown Prince Mohammed bin Salman's Vision 2030 overhaul and have been ramping up issuance to help generate loans needed to back giga projects from new tourism resorts on the Red Sea to stadiums related to the FIFA World Cup in 2034.
Funding needs are increasing as Saudi Arabia's finances are stretched by a combination of lower oil prices, a slowing economy and elevated investment requirements.
Selling junior debt is one way Saudi banks have been able to free up capital in order to keep making loans. SNB and others are also looking at offloading bad loans through securitization deals, with the first major sale possibly coming this year, Bloomberg News has reported.
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Earlier this month, SNB completed a 1.73 billion riyal ($461 million) AT1 sukuk bond sale. There are almost a dozen bookrunners on the current deal, including
Proceeds on the sale are set to be used in part to strengthen SNB's capital base, according to the person familiar.
--With assistance from Olga Voitova.
(Adds deal size in second paragraph)
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