Aramco markets five-tranche bonds and appears for money amid low-cost oil

© Reuters. FILE PHOTO: An employee in a branded helmet is pictured at the Saudi Aramco oil factory in Abqaiq

By Yousef Saba

DUBAI (Reuters) – Saudi Aramco (SE 🙂 began marketing a US dollar-denominated five-tranche bond sale Tuesday as the world’s largest oil producer looks for cash after low oil prices weighed on its finances.

The move is part of an onslaught of Gulf issuers in international debt markets trying to cram finances hit by the pandemic and weak oil prices. This has resulted in regional issuance back above $ 100 billion after last year’s record.

Aramco needs the money to pay dividends of $ 37.5 billion for the second half of 2020 and to purchase 70% of Saudi Basic Industries (SABIC) (SE 🙂 for $ 69.1 billion Finance dollars.

That year, a $ 10 billion loan was raised and paid in installments through 2028 to support this acquisition.

Aramco gave an initial price forecast of around 140 basis points (basis points) versus US Treasuries (UST) for a three-year tranche, around 155 basis points versus UST for five-year bonds, around 175 basis points versus UST for 10-year bonds and around 205 basis points BPS over UST for a 30-year tranche and around 230 bps over UST for 50-year bonds, the document says.

There were no official figures on its size, but Aramco’s second foray into international debt markets is expected to be sizeable after raising $ 12 billion to issue debut bonds last year.

“An issuer like this usually doesn’t print tranches that are less than $ 1.5 billion or so,” one banker said of the deal.

Last year, Aramco priced inside Saudi Arabia’s state curve, but financial sources expect the new bonds to widen by around 10 basis points, suggesting that investors are seeing a slightly higher risk profile after this year’s drop in oil prices.

Citi (N :), Goldman Sachs (N :), HSBC (L :), JPMorgan (N :), Morgan Stanley (N 🙂 and NCB Capital (SE 🙂 were hired as active book runners, as shown by a document issued by one of the banks about the deal.

Other banks involved in the deal are BNP Paribas (PA :), BOC International (SS :), BofA Securities (N :), Credit Agricole (PA :), Erste Abu Dhabi Bank (AD :), Mizuho (T :), MUFG (T :), SMBC Nikko (T 🙂 and Societe Generale (PA 🙂 showed the document.

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