Bloomberg/Simon Dawson

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Saudi Aramco receives $100 billion demand for debut international bond

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The bond sale is largely seen as Plan B to raise money for the Kingdom’s economic agenda after the initial public offering (IPO) of Aramco was postponed until at least 2021.

Tuesday 09, April 2019

(Bloomberg) --Saudi Aramco’s debut international bond has received $100 billion in orders, a record breaking vote of market confidence for the state-owned oil giant.

The order book is likely to be the largest ever seen in emerging markets, covering many times the $10 billion to $15 billion Aramco is expected to raise. It’s a sign of investors’ hunger for yield in a world where bonds from some developed nations have negative interest rates.

With strong demand, Aramco told investors it expects to pay about 1.25 percentage points more than US Treasuries for its 10-year notes, compared with Saudi sovereign bonds trading at about 1.27 percentage points.

Traditionally, those risk premiums fall in a high-demand bond sale as the process advances, suggesting Aramco may pay even less.

The oil giant has lined up a list of international banks supporting its jumbo bond deal and the lenders not only want to participate on the bond sale, but also ensure they’re well placed in case Saudi Aramco goes ahead with its planned IPO.

Jamie Dimon, JPMorgan Chase’s Chief Executive Officer, spoke at a lunch in New York last week to market the deal.

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

The bond sale which was pitched to investors last week in a global roadshow from Tokyo to New York and London, has forced Aramco to reveal financial and operational secrets held closely since the company’s nationalisation in the late 1970s, shedding a light on the relationship between the kingdom and its most important asset.

Both Fitch Ratings and Moody’s Investors Service assigned Aramco the fifth-highest investment-grade rating, the same as Saudi sovereign debt.

The company plans to use some of the proceeds of the bond sale to pay for the $69 billion acquisition of a majority stake in local petrochemical company SABIC from the Kingdom’s sovereign wealth fund.

TAGS : Saudi Aramco, SABIC , PIF, Morgan Stanley, JP Morgan, Citigroup, HSBC Holding , NCB Capital

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