DUBAI, Jan.11 (Reuters) – Oman seeks to raise up to $ 2 billion with loan arranged primarily by local and regional lenders, as international banks exercise caution amid deteriorating credit profile , sources said.

Oman began talks with banks for a new loan of at least $ 1 billion in November, sources told Reuters at the time, as it braced for heavy debt repayments.

He is now working with a group of banks to raise a $ 1.1 billion facility that could reach $ 2 billion depending on market appetite, two sources familiar with the matter said.

The banks carrying out the operation are HSBC, Mashreqbank, Gulf International Bank, Bank Muscat and Bank Dhofar, the sources said.

The loan, now marketed to a larger group of lenders, has a maturity of 15 months with the option of extending it for an additional 12 months at the borrower’s discretion.

HSBC declined to comment. Other banks and Oman’s finance ministry did not respond to requests for comment.

The presence of only HSBC among the top group indicates that international banks have become more cautious about their exposure to Oman due to its declining credit trajectory in recent years, as lower oil prices have hammered state finances, the sources said.

For small regional banks, Oman – rated under investment grade by all major rating agencies – is a rather good opportunity as its borrowing costs have increased.

“The overall lending landscape in Oman has changed,” said one of the sources.

Part of the new loan will refinance a billion dollar debt facility maturing in January, the same source said.

Oman’s external debt maturing this year and next stands at $ 10.7 billion, or about 7.5% of gross domestic product, S&P Global Ratings said.

Oman expects a 2021 budget deficit of 2.24 billion rials ($ 5.82 billion) this year. To fill the deficit, the government aims to raise about 1.6 billion by borrowing and to draw 600 million from its reserves. ($ 1 = 0.3847 Omani rials) (Report by Davide Barbuscia, edited by Ed Osmond)


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