Saudi Aramco, the state oil giant, has re-entered the debt market after three years, aiming to raise at least $3 billion through a bond sale. This move aligns with the trend of Gulf companies and governments leveraging favorable market conditions to secure funds for investment.
Aramco has hired banks to manage the sale of bonds with maturities of 10, 30, and 40 years. According to a source familiar with the matter, the bond sale anticipates consisting of three tranches, potentially raising over $3 billion. The company has yet to provide an official comment.
Market Analysis and Saudi Arabia’s Economic Strategy
Zeina Rizk, co-head of fixed income at Amwal Capital Partners, highlighted the strategic timing of Aramco’s move. “The timing suggests Aramco is taking advantage of the last window ahead of the summer illiquidity,” she told Reuters.
Gulf entities have been active in debt markets this year, with Saudi Arabia issuing $12 billion in dollar-denominated bonds in January and $5 billion in sukuk in May. Aramco previously tapped global debt markets in 2021, raising $6 billion through a three-tranche sukuk.
Aramco, a major revenue source for the Saudi government, expects to declare $124.3 billion in dividends for 2024, primarily benefiting the Saudi state. The company recently announced several strategic moves, including awarding $25 billion in contracts for gas expansion, acquiring a 10% stake in Renault and Geely’s joint venture Horse Powertrain, and a non-binding agreement with U.S. energy firm Sempra for liquefied natural gas purchases.
Future Plans and Acquisitions
Yousef Husseini, an analyst at EFG Hermes, suggested that Aramco’s bond sale indicates the company’s intent to continue aggressive acquisitions. Additionally, part of Aramco’s dividends supports the Public Investment Fund (PIF), which owns 16% of the company. The Saudi government, which holds about 81.5% of Aramco, recently raised $11.2 billion by selling a portion of its shares in the company, bolstering funding for the “Vision 2030” initiative aimed at economic diversification away from oil.
PIF, focused on diversifying Saudi Arabia’s investments, has raised nearly $8 billion through three debt sales. Monica Malik, chief economist at Abu Dhabi Commercial Bank, noted that tapping debt markets helps reduce pressure on domestic funding and liquidity as Saudi Arabia pursues its extensive investment program.
Banking Partners and Investor Calls
Citi, Goldman Sachs International, HSBC, JPMorgan Chase, Morgan Stanley, and SNB Capital have been appointed as joint active bookrunners for the bond sale. They will arrange investor calls for the potential issuance of benchmark-sized notes. The document did not specify the exact size of the issuance.
Other banks involved as joint passive bookrunners include Abu Dhabi Commercial Bank, BofA Securities, Bank of China, Emirates NBD, First Abu Dhabi Bank, GIB Capital, and Mizuho. Aramco’s 40-year tranche would be its second-longest dated bond, following the $2.25 billion notes due in November 2070.
