Aramco’s bond debut attracts $30bn bids

Aramco’s bond debut attracts $30bn bids

The Saudi plan to use their state-run oil giant, Aramco, as a piggy bank panned out fabulously for the Kingdom on Tuesday, with global investor demand topping $100 billion in Aramco's first-ever foray into worldwide debt markets. The company told investors it would sell debt in six portions, from three to 30 years, according to the people familiar with the matter.

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 opening the books earlier on Monday, the Aramco issue - which will be priced on Tuesday - had already attracted over $30bn in demand, Saudi Energy Minister Khalid al-Falih said. 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.

The state company has insisted on its independence while meeting investors ahead of the bond issue last week, saying the Saudi government remained committed to Aramco's governance framework to safeguard its independence even when oil prices dropped.

The acquisition will be financed through a mixture of bonds as well as the oil company's vast cash reserves, The National reported last week.

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.

Aramco previous year postponed a planned initial public offering to 2021.

"The success of this bond issue will be the litmus test and a crucial precursor for the anticipated Aramco IPO within the next two years", said Salah Shamma, head of investment, MENA equities, at Franklin Templeton.

The longer-dated tranches offer a small premium over Saudi sovereign debt, but this is expected to shrink as the notes are marketed.

Aramco has agreed to buy a 70 percent stake in SABIC from Saudi Arabia's sovereign wealth fund, known as the Public Investment Fund (PIF).

That demand will allow Aramco to pay less for its debt than the Saudi government - a rare development for a state-owned entity, and underscoring the financial strength of the world's most profitable company.

Aramco has hired Lazard as financial adviser for the bond deal.

"It's not a surprise that the most profitable company in the world. on a debut worldwide bond sale is capturing tons of investors' interest", said Aarthi Chandrasekaran, portfolio manager at SHUAA Asset Management. The offering also includes a three-year floating rate bond.

JPMorgan and Morgan Stanley are managing the bond sale along with Citigroup Inc., Goldman Sachs Group Inc., HSBC Holdings, and NCB Capital.

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