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Aramco is set to raise USD 6 bn from its fresh USD-denominated bond offering, Reuters reports, citing a document by one of the sale’s arranging banks. Orders for the three-tranche bond offering by investors topped USD 31.5 bn, luring in USD 11 bn for each of the 10-year tranche and the 30-year tranche, with the 40-year tranche drawing in over USD 9.5 bn in demand. This is the oil giant’s first bond sale in three years.
What we know: The document showed final terms of the arrangement include USD 2 bn from the 10-year tranche at 105 basis points (bps) over US Treasuries, USD 2 bn from the 30-year tranche at 145 bps premium and USD 2 bn in 40-year notes at a 155 bps premium. The spreads were narrowed from an initial guidance of 140 bps over US Treasures for the 10-year tranche and 180 bps and 195 bps for the 30-year and 40-year tranches, according to IFR.
Where the money is going: Aramco will earmark the proceeds of the bonds for “general corporate purposes” and could include additional purposes in the final terms of the issuance, it said earlier. The proceeds could be used “to refinance existing borrowings and contribute to its investment program,” Bloomberg reported earlier.
What the pundits are saying: “Aramco is extending maturities as it will continue to gradually leverage up given their expansion plans and capex needs,” Union Bancaire Privee managing director of fixed income advisor Apostolos Bantis told Bloomberg. “With such strong demand the [sale] will most likely price flat to the Saudi sovereign.”
REMEMBER- The bond sale is Aramco’s first since it raised USD 6 bn from a three-tranche sukuk offering in 2021.
Saudi’s debt spree: Saudi Arabia has sold over USD 33 bn worth of debt this year — topping China as the biggest issuer of international debt among emerging markets — to close its SAR 81 bn budget deficit from project spending. Recent debt sales include USD 5 bn worth of FCY-denominated sukuk with three-, six-, and 10-year tranches in May, and a USD 12 bn USD-denominated sovereign bond sale back in January.
ADVISORS- Citi, Goldman Sachs International, HSBC, JP Morgan, Morgan Stanley, and SNB Capital are active joint bookrunners, while the passive joint bookrunners for the issuance are Abu Dhabi Commercial Bank, Anb capital, Bank of China, BofA Securities, BSF Capital, Emirates NBD Capital Limited, First Abu Dhabi Bank, GIB Capital, Mizuho, MUFG, NATIXIS, Riyad Capital, SMBC Nikko and Standard Chartered Bank.
ALSO FROM ARAMCO-
Aramco’s blockbuster secondary offering drummed up a total of USD 12.4 bn in proceeds by exercising the greenshoe option following the end of the stabilization period, according to a disclosure to Tadawul (pdf). The total proceeds are USD 1 bn more than previously expected.
The details: The option was pulled by the sale’s stabilizing manager Merill Lynch KSA, which placed an addition 154.5 mn shares at a set final price of SAR 27.25. The move raised the stake on offer to 0.7% up from 0.64%, bringing the sale’s net yield to USD 12.4 mn up from USD 11.2 bn. Bloomberg also has the story.
REFRESHER- The transaction comes as the government, Aramco’s majority shareholder, looks to unlock non-oil sources of income to plug its budget deficit and push USD bns worth of gigaprojects out of the pipeline. Think massive investments in sports, AI, tourism, and infrastructure. Proceeds from the sale will likely go into the Public Investment Fund’s coffers, analysts previously told Reuters.
