Aramco reportedly raised USD 3 bn from its USD-denominated sukuk issuance, after closing its order book with strong demand, Reuters and Bloomberg reported.

High demand = tighter pricing: The oil giant reeled in some USD 22 bn of orders for the Shariah-compliant bond sale, which included two equal tranches of five- and 10-year tenors. Pricing for both notes was tightened by 35 bps on the back of strong demand, leaving the shorter tranche at 85 bps above US treasuries and the longer one at 100 bps above the benchmark.

This is the second time Aramco taps international debt markets this year: Aramco closedits first bond sale in three years in July, raising USD 6 bn from the sale of USD-denominated 10-year, 30-year, and 40-year senior unsecured notes. The offering was 6x oversubscribed. The rise in Aramco’s borrowing activity this year comes as the company’s dividend payments grew above its freecash flow in 1H 2024 amid a weaker outlook for oil revenue, Abu Dhabi Commercial Bank’s Chief Economist Monica Malik told Reuters.

IN CONTEXT- The government counts on Aramco dividends to bridge budget deficit and to finance its diversification away from oil, with the latter accounting for some 67% of government revenues at present. The company’s dividends pushed SAMA’s foreign reserves to an 18-month high of SAR 1.67 tn in May. Saudi Arabia’s government owns 97% of Aramco.

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.

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