Saudi Arabia said it would do anything necessary to defend the riyal currency's peg against the US dollar as it began meeting investors before its first international sovereign bond sale, according to people who attended the meetings.
The kingdom, seeking to finance a huge state budget deficit caused by low oil prices, may issue around $10 billion or more of five-, 10- and 30-year dollar bonds in one of this year's most eagerly awaited emerging market debt sales.
A two-day series of meetings between Saudi officials and investors began in London on Wednesday. Three days of meetings in the United States will end on Oct. 18 in New York.
Investors participating on Wednesday said the closed-door meetings were packed - one involved 100 people, with bankers standing because of a lack of seats.
The prospectus for the bond issue noted there was a risk that Riyadh might eventually abandon its currency peg, but Saudi officials stressed at the meetings that there was no danger of this any time soon.
"They said they would defend the peg to the last dollar," one London investor told Reuters.
Another said: "There was an impassioned defence of the currency peg ... They said it suited the structure of the economy they have, but on the other hand they were pretty clear they wanted to have a different structure in 15 years, which means they really won't need the peg by then."
Many participants said the Saudis gave no clear indication, even in one-on-one conversations, of pricing or how much they aimed to issue, although the kingdom is widely expected by the market to pay a premium to Qatar's dollar debt.
One banker said he thought the issue might be only about $2 billion for each of the three tranches, but another predicted the total size would be between $15 billion and $20 billion.
"It's a very large syndicate so the bond will be placed all over the world - there will be large take-up in China, and (by) Middle Eastern banks," the second banker said.
"I think many people will think it's a good return given the risks. It's lower-rated than Qatar but a lot more yield."
Anders Faergeman, portfolio manager at PineBridge Investments, whose colleague attended a meeting, said that although general bond market sentiment had worsened slightly this week, the Saudis could probably sell $15 billion of bonds if they chose.
"But the question is how much are they willing to leave on the table, because they will be a serial issuer. They will come back next year and the year after, so they have to make this deal a success not just for themselves but also for investors."
One potential risk seen by some US investors, last month's vote by the US Congress to allow relatives of victims of the Sept. 11 attacks to sue Saudi Arabia, was not addressed at the London meetings, several participants said.
Several said the Saudi officials, who included Minister of State Mohammed al-Sheikh, a central figure in economic reforms designed to reduce the kingdom's reliance on oil exports, were impressive speakers and in command of their material.