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JPMorgan has recently tried to sell at a discount loans it holds of the sovereign wealth funds of the two major oil producers in the Gulf, Saudi Arabia and the UAE, Reuters reported on Thursday, citing sources and a document it has seen.
JPMorgan’s reported move this week comes as banks are readying for another round of loan requests from the oil-producing countries in the Persian Gulf as the oil price crash, the crumbling oil demand, and the coronavirus pandemic are squeezing their budgets and making them resort to more borrowing to fill in the shortages.
According to the loan document Reuters has seen, JPMorgan quietly marketed this week loans it had extended to the Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth fund, and to Mubadala Investment Company, the sovereign wealth fund of Abu Dhabi. The bank offered the loans for sale at 98.75 cents on the dollar for at least US$50 million of a PIF loan, and at 99 cents on the dollar for loans to Mubadala, Reuters reports.
Apart from JPMorgan, other international banks with loans to oil producing countries in the Gulf have also tried to sell down their exposure to the wealth funds in the Middle East, a source based in the Persian Gulf told Reuters.
“Generally the expectation this year is there will be a lot of asks for the region ... so you make room ahead of that,” the source told Reuters.
Middle East oil producers have already started to tap the debt markets amid growing fiscal pressures on their economies and wealth funds in the oil price crash and the coronavirus pandemic.
Qatar sold this week US$10 billion in three-tranche bonds, which received four times as many offers—a sign that investors lapped up the ‘juicy yields’ that Qatar offered. Qatar’s bond issue—the first in the Gulf region since oil prices crashed and the pandemic battered economies and oil demand—is viewed as a test for investor interest in bonds from Middle East’s oil producers amid collapsing oil prices.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.