Aramco (2222) aims to raise at least USD 3 billion from its first international bond issuance in three years.
Details
A banking document revealed that the world’s largest oil producer has appointed banks to sell senior unsecured debt tranches.
These tranches will have maturities of 10, 30, and 40 years, according to Reuters.
It’s worth noting that “Aramco” first issued bonds in 2019 and sold 50-year debt instruments in 2020.
The company also issued dollar-denominated Shariah-compliant bonds (Sukuk) in 2021.
So What
Bloomberg reported that the debt sale could exceed USD 3 billion, depending on investor appetite.
This comes after the Saudi government sold a 0.64% stake in “Aramco” last month, which was worth USD 11.2 billion.
The company plans to channel the proceeds from the secondary offering to refinance existing loans and contribute to its investment program.
In February, Aramco’s CFO Ziad Al-Murshed stated that the company was considering selling debt with maturities ranging from 15 to 50 years in 2024.
This comes as financial markets improve, with the company seeking to bolster the efficiency of its massive balance sheet.
On another note, Gulf companies and governments have rushed to debt markets since the start of this year to take advantage of the recent declines in global interest rates.
In January, the kingdom issued dollar bonds worth USD 12 billion.
Some Context
Aramco recently launched a major investment plan, signing construction contracts worth about USD 25 billion.
This is to develop the massive Jafurah unconventional gas field.
Notably, the company continued to distribute quarterly dividends of USD 31 billion in May.
This benefited the state and investors despite a drop in its profits.
The company’s free cash flow (money that a company generates after accounting for cash outflows to support operations) amounting to USD 22.8 billion during that period was less than the total dividend payouts.
In February, Al-Murshed confirmed that the company would continue paying dividends to investors and would not need to issue debt for that purpose.
He added that the core dividends would be “sustainable and progressive,” meaning that Aramco aims to increase them in the coming years.
Now What
The minimum subscription for Aramco’s medium-term international bonds is USD 200,000, with additional increments of USD 1,000.
The company is expected to set the offering price and maturity duration based on market conditions.
