Aramco’s USD 3 bn sukuk issuance was 6x oversubscribed

Aramco’s USD 3 bn international sukuk issuance was 6x oversubscribed, it said in a statement. The Shariah-compliant issuance — which was listed on the London Stock Exchange — was split into two equal tranches of five- and 10-year maturities. The shorter tranche carries an annual yield of 4.25%, while the longer one has a 4.75% yield. This is the second time Aramco taps international debt markets this year after closing its first bond sale in three years in July, raising USD 6 bn.

Where the money is going: The oil giant earmarked the fresh funds for enhancing its liquidity position, the statement reads without elaborating further. Aramco’s dividend payments exceed the freecash flow (FCF) the company is generating, putting it in a net negative FCF position that is “unsustainable,” Bloomberg reported back in August. To sustain these dividends, the world’s largest oil company may need to take on more debt, the business information service said.

The issuance is unsubordinated + unsecured: The issued trust certificates are unsubordinated, which means they are not inferior to other debt held by the issuer in terms of repayment priority, according to a disclosure to Tadawul. They are also unsecured, indicating that no specific assets are held as collateral to back the issuance, while certain assets are directly tied to it. The certificates are also limited recourse obligations which means if the issuer defaults and the assets directly tied to the issuance are insufficient for repayment, investors can’t pursue the issuer’s other assets.

ADVISORS- Al Rajhi Capital, Citigroup, Dubai Islamic Bank, First Abu Dhabi Bank, Goldman Sachs International, HSBC, JPMorgan, KFH Capital, and Standard Chartered, among other GCC-based banks, acted as active joint bookrunners for the issuance, according to a disclosure to Tadawul.