Saudi Aramco's $10bn bond sale will close on Wednesday

12 April, 2019, 01:21 | Author: Eric Barnett
  • Aramco’s bond debut attracts $30bn bids

Previously reluctant to do so, Aramco last week opened for the first time its books to investor scrutiny, showing it is by far the most profitable company in the world.

Pension funds and insurance companies in the United States and Taiwan are traditionally interested in investing in long-dated securities to match their own long-term commitments.

As part of its debut in the global debt market, Aramco has offered bonds in six portions, from three to 30 years, according to the people familiar with the matter, who asked not to be identified because the information is private.

State-owned Aramco is expected to raise more than $10 billion from the deal, which will be priced later on Tuesday and is seen as a gauge of potential investor interest in the Saudi company's eventual initial public offering.

"The bond issue is at a very critical stage". The bond is expected to attract demand from both emerging markets and investment-grade buyers, as Aramco's status as the world's largest oil company would put its bonds in the same league as those issued by independent global oil majors like Exxon and Shell. Orders tracked upwards to $85 billion by Tuesday, with pricing expected later Tuesday.

The company expects to pay about 1.25 percentage points more than U.S. Treasuries for its 10-year notes, compared with Saudi bonds trading at about 1.27 percentage points, the banks selling the debt told investors.


In a company presentation last week, however, the company said the deal will close in 2020. When Qatar, a rival Middle East nation, sold $12 billion in bonds earlier this year, it got a record $50 billion in orders, evidence of investor appetite for debt of rich, oil-producing nations.

The IPO was announced with a great deal of fanfare by the Saudi Crown Prince, Mohammed Bin Salman (MBS), and the success of the bond sale may mean that he can forego the IPO plan without losing face.

Aramco, however, said the bond issue was not linked to the SABIC acquisition, which will be paid in tranches through internal cash flow and, potentially, other resources. But increased global investor appetite for the issue would reassure Aramco and the Kingdom that its appeal in worldwide markets remained as strong as ever.

Aramco is raising money as bond investors search for higher yields.

The sale highlights the kingdom's continued commitment to its economic reform plans and is part of a fundraising strategy by Saudi Aramco to help fund its recent purchase of a $69.1 billion stake in Saudi Arabian Basic Industries Corp.

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