Aramco secures $31 billion in bond orders

Saudi Aramco has attracted orders worth $31 billion for a new bond the company said it would place on international markets. The bond was worth $6 billion.

In its first debt offering in three years, the Saudi energy giant offered 10- and 30-year bonds, with bids for both exceeding $11 billion, Bloomberg reported. reportedciting an unnamed source familiar with the matter. The company also offered investors a 40-year bond in the tranche.

Initially, it was expected to offer a yield 140 basis points higher than the US Treasury yield for 10-year bonds, 180 basis points higher than the US Treasury yield for 30-year bonds and 195 basis points higher than the US Treasury yield for 40-year bonds. However, thanks to strong investor interest, spreads were tightened to 105 basis points for 10-year bonds, 145 basis points for 30-year bonds and 155 basis points for 40-year bonds.

According to initial reports of the bond issue, the proceeds from the issue would be used to refinance existing debt and help the investment program of the world’s largest oil company in terms of market value and production.

“Aramco is extending its maturities as it will continue to leverage itself gradually given its expansion plans and investment needs,” the managing director of fixed income advisory Union Bancaire Privée told Bloomberg.

Aramco is a major source of revenue for the Saudi government, which has large-scale plans to diversify the Saudi economy. The Saudi government directly owns 81.5% of Aramco, while another 16% is held by the kingdom’s sovereign wealth fund, the Public Investment Fund. According to Reuters, Aramco plans to pay out some $124.3 billion in dividends this year.

A month before the bond issue was announced, Aramco said it would also offer more shares to investors. The offering, which was priced at a discount, raised more than $12.3 billion for the Saudi company. The initial proceeds were $11.2 billion, but the offering had an over-allotment option that went into effect, bringing the total to $12.35 billion.

By Irina Slav for Oilprice.com

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