Saudi Aramco set to raise $6bn from three-part bonds

Saudi Aramco expects to raise $6bn from its three-part bond sale on Wednesday, the oil giant’s first foray into the debt markets in three years, a document showed.

The document from one of the banks arranging the sale showed that the final terms of the deal include $2bn from a 10-year tranche at 105 basis points (bps) over US Treasuries, $2bn in 30-year notes at a 145-bps premium and $2bn in 40-year paper at a 155 bps premium.

Demand for the three tranches topped $31.5bn, drawing over $11bn for each of the 10- and 30-year tranches and more than $9.5bn for the 40-year bonds, the document showed.

Saudi Arabia raised $12.35bn from a much-anticipated secondary share sale in Aramco after increasing the offering, Merrill Lynch, which oversaw the so-called greenshoe option, said on Wednesday.

The bond sale was Aramco’s first since it raised $6bn from three-tranche sukuk, or Islamic bonds, in 2021, taking advantage of favourable market conditions.

Aramco has long been a cash cow for Saudi Arabia, which is seeking funds to invest in new industries and wean its economy away from oil under its Vision 2030 plan.

Aramco expects to pay $124.3bn in dividends in 2024, most of which will go to the government, which directly owns about 81.5 per cent of the company. Its sovereign wealth Public Investment Fund owns another 16 per cent.

With the latest bond sale, Aramco joined top firms and governments in the GCC region rushing to markets this year to fund investments. Proceeds will be used for general corporate purposes.

IFR reported that the spreads have tightened from initial guidance of around 140 basis points (bps) over US Treasuries (UST) for the 10-year paper, 180 bps over UST for the 30-year, and 195 bps for the 40-year.

State-owned companies in emerging markets issued dollar-denominated bonds worth $21.4bn in the first half of the year, investment firm Tellimer said in a report. This was up 22% from a year earlier.

Saudi state-owned firms led the group with 23 per cent of the overall issuance value, while the government raised $12bn of dollar-denominated bonds in January and $5bn in sukuk in May.

Aramco was awarded $25bn worth of contracts last month for its gas expansion plans. It also said it would buy 10 per cent of Renault and Geely’s joint venture for thermal engines, Horse Powertrain, and announced a non-binding deal with US energy firm Sempra to buy liquefied natural gas.

The company had flagged in February it was likely to issue bonds this year. Its 40-year tranche will become its second-longest dated bonds after $2.25bn of notes due in November 2070.

Read: Saudi Arabia raises $12bn from Aramco’s share sale