Friday, 19 April, 2019

International Business: Aramco gets whopping $100 billion demand for landmark bond

Aramco’s bond debut attracts $30bn bids Saudi Aramco breaks record as demand for its bond tops $85 billion
Priscilla Morrison | 12 April, 2019, 01:20

The bond sale by energy giant Saudi Aramco has attracted record demand of $85 billion from investors, one hour before bidding closed, a banking source told AFP.

Aramco is marketing a US dollar denominated debt issue split into six tranches.

Sergey Dergachev, a manager of emerging market corporate debt at Germany-based Union Investment, said ahead of the issue that he expected demand for to reach $45 billion-$50 billion, as the issue's different maturities would attract a wide range of investors from different regions.

The order book is set to be the largest ever seen in emerging markets, covering many times the $10 billion to $15 billion Aramco is expected to raise.

Before the Six-part Bond deal was disclosed on Monday, Saudi Energy Minister, Khalid al-Falih expressed that the initial indications of interest valued at about $10 Billion. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Ahead of the bond issue, Aramco revealed its accounts to worldwide ratings agencies for the first time ever.

In a company presentation last week, however, the company said the deal will close in 2020. Both Fitch Ratings and Moody's Investors Service assigned Aramco the fifth-highest investment-grade rating, the same as Saudi sovereign debt, but lower than oil majors Exxon Mobil Corp., Royal Dutch Shell Plc and Chevron Corp.

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Initial indications of more than $30bn in investor demand - before the bonds were actually sold - prompted Aramco to market the notes with nearly no premium to Saudi government debt.

The offering also comes ahead of a planned IPO where Aramco will offer part of its shares in global stock markets in about two years.

"The link between the two however is understandably very strong", he said.

Falih is also chairman of state-owned Aramco, the world's largest energy company. And later in the bond market itself, where the Saudi government successfully raised debt this year.

The main question now is whether Aramco even needs to go public, or whether the unusual acquisition of a almost 70-percent stake in Saudi Arabia's Sabic petrochemicals giant means it's sidelined IPO plans altogether.

In a rare development for a state-owned company, Aramco could be on track to pay less for its debt than the Saudi government, the same people said, asking not to be named before the bond pricing later on Tuesday.

It would also encourage Aramco to go back to the bond markets at a later date. JP Morgan, Morgan Stanley, HSBC, Citi, Goldman Sachs and National Commercial Bank have been chosen to arrange the bond issue.

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