Aramco starts marketing five-tranche bonds

Dubai

SAUDI Aramco began marketing a five-tranche US dollar-denominated bond sale on Tuesday, as the world's largest oil producer seeks cash after low oil prices dented its finances.

The move is part of an onslaught on international debt markets by Gulf issuers seeking to plug finances hit by the pandemic and weak oil prices, which has pushed regional issuance past last year's record to surpass US$100 billion again.

Aramco needs the money to pay dividends of US$37.5 billion for the second half of 2020 and fund its US$69.1 billion purchase of 70 per cent of Saudi Basic Industries. It raised a loan of US$10 billion this year, to be paid by instalments until 2028, to back that acquisition.

Aramco gave initial price guidance of around 140 basis points (bps) over US Treasuries (UST) for a three-year tranche, around 155 bps over UST for five-year bonds, around 175 bps over UST for 10-year notes, around 205 bps over UST for a 30-year tranche and around 230 bps over UST for 50-year bonds.

There has been no official indication of size but its second foray into the international debt markets is expected to be sizeable, after raising US$12 billion in its debut bond issuance last year. "An issuer like this doesn't usually print tranches smaller than US$1.5 billion or thereabouts," a banker on the deal said.

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Last year, Aramco priced inside the sovereign of Saudi Arabia's curve, but financial sources expect its new bonds to be around 10 bps wider, suggesting investors see a slightly higher risk profile after this year's drop in oil prices.

Citi, Goldman Sachs, HSBC, JPMorgan , Morgan Stanley and NCB Capital were hired as active bookrunners, a document issued by one of the banks on the deal showed. Other banks involved include BNP Paribas, BOC International, BofA Securities, Credit Agricole, First Abu Dhabi Bank, Mizuho, MUFG, SMBC Nikko and Societe Generale. REUTERS