{"id":92410,"date":"2024-12-11T00:00:00","date_gmt":"2024-12-11T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/ksa\/2024\/12\/11\/fitch-affirms-aramcos-a-credit-rating-on-solid-financials-and-government-fallback\/"},"modified":"2024-12-11T00:00:00","modified_gmt":"2024-12-11T00:00:00","slug":"fitch-affirms-aramcos-a-credit-rating-on-solid-financials-and-government-fallback","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/ksa\/2024\/12\/11\/fitch-affirms-aramcos-a-credit-rating-on-solid-financials-and-government-fallback\/","title":{"rendered":"Fitch affirms Aramco\u2019s A+ credit rating on solid financials and government fallback"},"content":{"rendered":"

Fitch Ratings affirmed Aramco\u2019s long-term issuer default rating (IDR) at A+ with a <\/strong>stable <\/strong>outlook<\/strong>, keeping the company firmly in the top-tier credit league, according to a recent report<\/a>. Meanwhile, Aramco\u2019s standalone credit profile (SCP) was at AA+, placing it as the country\u2019s highest ranked issuer with respect to the measure. The state-owned oil giant\u2019s credit rating is constrained by Saudi Arabia\u2019s sovereign rating due to the firm\u2019s strong association with the Saudi government as its majority shareholder<\/p>\n

(** Tap or click the headline above to read this story with all of the links<\/strong> to our background and outside sources.)<\/p>\n

REMEMBER:<\/strong> Aramco closed its first bond sale in three years<\/a> in July and tapped the debt market again in August<\/a> \u2014 raising a combined USD 9 bn so far this year.<\/p>\n

Why Aramco\u2019s rating held firm: <\/strong>Fitch cites several factors as helping sustain Aramco\u2019s rating, including a robust financial profile, prudent decision making and oversight, strong free cashflows (FCF) and reserves, and conservative financial policies. \u201cWe assess the preservation of government policy role factor as 'Very Strong' due to Saudi Aramco's key role in the Saudi Arabian economy as a key provider of feedstock to the country's power generation fleet and other key end-markets,\u201d the report said. Despite not needing government support in the past, Fitch believes that there are \u2018strong\u2019 precedents for support from the Saudi government based on a track record of backing for other government-related entities. <\/p>\n

Aramco might need to tweak its dividends policy if fundamentals change:<\/strong> Saudi Aramco has been able to sustain its generous base and performance-linked dividends policy so far, but the payouts have consumed substantial liquidity with performance-linked dividends accounting for 50-70% of FCF net of base dividends and other outlays. Fitch maintains that the policy has not adversely impacted Aramco\u2019s credit outlook due to the assumption that Aramco has the \u201cflexibility to reconsider\u201d its payouts if oil prices plummet or capex exceeds projections. <\/p>\n

ICYMI:<\/strong> Saudi Aramco swung into a net debt position<\/a> for the first time in two years in 3Q, as the oil major continues to distribute dividends that exceed its earnings. The oil major will have to decide early next year between maintaining its generous payouts to shareholders \u2014 and consequently increasing borrowing \u2014 or cutting back dividends and depriving the Saudi state of key financing it needs to shore up its budget<\/p>\n

Despite being comfy at the moment, Aramco still faces noteworthy risks: <\/strong>Its rating remains tethered to Saudi\u2019s sovereign rating of A+<\/a>, meaning any downgrade in the Kingdom\u2019s rating would directly impact the oil company. Fitch also cites lower oil prices, higher capex, more leveraging, and a faster-than-expected energy transition as additional factors that could adversely affect the oil major\u2019s credit rating. <\/p>\n","protected":false},"excerpt":{"rendered":"

The oil major ramped up borrowing this year to keep on top of generous dividend payouts<\/p>\n","protected":false},"author":1,"featured_media":92411,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"newspack_ads_suppress_ads":false,"newspack_popups_has_disabled_popups":false,"newspack_sponsor_sponsorship_scope":"","newspack_sponsor_native_byline_display":"inherit","newspack_sponsor_native_category_display":"inherit","newspack_sponsor_underwriter_style":"inherit","newspack_sponsor_underwriter_placement":"inherit","ep_exclude_from_search":false,"_primary_brand":0,"newspack_featured_image_position":"","newspack_post_subtitle":"","newspack_article_summary_title":"Overview:","newspack_article_summary":"","newspack_hide_updated_date":false,"newspack_show_updated_date":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[2590],"tags":[139,57,10,307],"brand":[],"newspack_spnsrs_tax":[],"class_list":["post-92410","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-debt-watch","tag-aramco","tag-debt-watch","tag-enterpriseam-ksa","tag-fitch-ratings","wpautop","entry"],"acf":{"mongo_id":"0b640011-421f-4ecc-af3c-4f7b6f7573ff","order":"3","is_powered_by":false,"story_type":"1","photo_url":"https:\/\/ent.news\/2024\/12\/983.jpg","photo_position":"above","homepage_title":"","full_issue_title":"Fitch affirms Aramco\u2019s A+ credit rating on solid financials and government fallback","related_issue":[92405],"teaser":"The oil major ramped up borrowing this year to keep on top of generous dividend payouts","voice_url":"https:\/\/s3.us-east-1.amazonaws.com\/ent.news\/audio\/2024\/12\/.3fe4d524-4678-4646-9934-870149b0eb46.mp3"},"yoast_head":"\nFitch affirms Aramco\u2019s A+ credit rating on solid financials and government fallback - 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