Saudi Aramco returns to debt market with sale of dollar bonds

(Reuters) – Saudi state oil giant Aramco returned to the debt market on Tuesday after a three-year hiatus, joining major Gulf companies and governments that have turned to the markets this year to finance investments.

Aramco hired banks to sell bonds maturing in 10, 30 and 40 years, a document from one of the banks that worked on the deal showed. Aramco will likely raise at least $3 billion in the three tranches, a source with knowledge of the matter said.

The company did not immediately respond to a request for comment.

“The timing suggests Aramco is taking advantage of the last window before the summer liquidity crunch,” Zeina Rizk, co-head of fixed income at Amwal Capital Partners, told Reuters.

Gulf companies and governments have raised funds in debt markets this year to take advantage of favorable market conditions, with top oil exporter Saudi Arabia issuing $12 billion in dollar-denominated bonds in January and 5 billion dollars in sukuk, or Islamic bonds, in May.

Aramco, which last tapped global debt markets in 2021 when it raised $6 billion through three-tranche sukuk, signaled in February that it would likely issue bonds this year. Aramco has long been a cash cow for the Saudi state, fueling decades of prosperity. It expects to declare $124.3 billion in dividends for 2024, most of which will go to the Saudi government.

Last month, the oil giant awarded contracts worth $25 billion for its gas expansion plans, said it would buy 10% of Renault and Geely’s heat engine joint venture, Horse Powertrain, and announced a non-binding agreement with the US energy company Sempra to purchase liquefied natural products. gas.

Aramco’s bond sale is “likely an indication that the company will continue to aggressively pursue acquisitions,” said Yousef Husseini, an analyst at EFG Hermes.

A portion of Aramco’s dividends also goes to the Public Investment Fund – the kingdom’s sovereign wealth fund that drives its aim to move the economy away from oil – which holds 16%.

The government, which directly owns about 81.5% of Aramco, raised $11.2 billion by selling a stake in its crown jewel last month. The proceeds could increase the country’s financing and its objective of moving the economy away from oil under a plan called “Vision 2030”.

PIF, which has spent billions on everything from electric cars to sports and planned futuristic desert cities, also raised nearly $8 billion from three debt sales.

“As Saudi Arabia’s financing needs for its investment program remain significant over the medium term, despite some deadlines having been extended, and in the absence of expected levels of FDI, tapping debt markets reduces pressure on domestic financing and liquidity”, said Monica. Malik, chief economist at Abu Dhabi Commercial Bank.

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Citi, Goldman Sachs International, HSBC, JPMorgan Chase, Morgan Stanley and SNB Capital were appointed as joint active bookrunners for the three-part bond sale.

Banks will organize calls with investors on Tuesday for the potential sale of benchmark-sized notes, according to the document, which did not disclose the size of the issuance.

Abu Dhabi Commercial Bank, BofA Securities, Bank of China, Emirates NBD, First Abu Dhabi Bank, GIB Capital and Mizuho are among the banks acting as joint passive brokers.

Aramco’s 40-year tranche would become its second-longest-maturity bond, after $2.25 billion in notes due in November 2070.

($1 = 0.7805 pounds)

(Reporting by Amna Mariyam in Bangalore and Federico Maccioni and Yousef Saba in Dubai; Editing by Tom Hogue, Sherry Jacob-Phillips, Jan Harvey, Elisa Martinuzzi and Emelia Sithole-Matarise)