Aramco takes first bond sale in three years to market

Saudi Aramco is selling fresh USD-denominated bonds, kicking off the issuance to qualified investors yesterday, according to two statements to Tadawul (here and here). The notes will be issued under Aramco’s Global Medium Term Note Program, according to the disclosures. This is the company’s first bond sale in three years.

The oil giant could raise at least USD 3 bn from the three-tranche issuance, Bloomberg reports, citing sources it says have knowledge of the matter. The senior unsecured notes include a 10-year tranche, a 30-year tranche, and a 40-year tranche, the business information service says. The exact value, pricing, and maturity will be determined based on market conditions, Aramco said in its disclosures. The minimum subscription is USD 200k, with additional investments in increments of USD 1k.

Where the money is going: Aramco will earmark the proceeds of the bonds for “general corporate purposes” and could include additional purposes in the final terms of the issuance, according to the disclosures. The proceeds could be used “to refinance existing borrowings and contribute to its investment program,” Bloomberg’s sources said.

What the pundits are saying: The timing of the issuance “suggests Aramco is taking advantage of the last window ahead of the summer illiquidity,” Amwal Capital Partners co-head of fixed income tells Reuters. Tapping the debt markets is also likely a sign that Aramco is looking at more acquisitions, EFG Hermes analyst Youssef Husseini told the newswire.

Saudi’s debt spree: Saudi Arabia has sold over USD 33 bn worth of debt this year — topping China as the biggest issuer of international debt among emerging markets — to close its SAR 81 bn budget deficit from project spending. Recent debt sales include USD 5 bn worth of FCY-denominated sukuk with three-, six-, and 10-year tranches in May, and a USD 12 bn USD-denominated sovereign bond sale back in January.

The big picture: Fitch expects the Gulf debt capital market to improve with increased issuances through 2024 and 2025 to approach USD 1 tn, with 40% in sukuk, according to its 1Q 2024 GCC Debt Capital Market Dashboard. The drivers of the expanding debt capital market are expected lower oil prices and interest rates combined with an uptick in developmental initiatives.

ADVISORS- Citi, Goldman Sachs International, HSBC, JP Morgan, Morgan Stanley, and SNB Capital are active joint bookrunners, while the passive joint bookrunners for the issuance are Abu Dhabi Commercial Bank, Anb capital, Bank of China, BofA Securities, BSF Capital, Emirates NBD Capital Limited, First Abu Dhabi Bank, GIB Capital, Mizuho, MUFG, NATIXIS, Riyad Capital, SMBC Nikko and Standard Chartered Bank.

IN OTHER DEBT NEWS-

Saudi National Bank raises USD 500 mn in Taiwanese Formosa bond sale: Tadawul-listed lender Saudi National Bank (SNB) issued five-year senior unsecured floating-rate note bonds on Taiwan’s Taipei Exchange, as part of its USD 5 bn EUR Medium Term Note Program, Arab News reports, citing a press release. The bank raised USD 500 mn from the sale. The move makes SNB the first Saudi bank to venture into Taiwan’s Formosa market.

SOUND SMART- The yield on this bond isn’t fixed. It is determined by the current overnight financing rate plus a fixed spread of 120 basis points.

Strong investor appetite: The sale was initially expected to raise some USD 300 mn, but strong investor demand raised the proceeds to a total of USD 500 mn.