Aramco to sell $6B in dollar-denominated Islamic bonds

A company logo sits on the side of a crude oil storage tank at the Juaymah tank farm at Saudi Aramco's Ras Tanura oil refinery and oil terminal in Ras Tanura, Saudi Arabia, on Oct. 1, 2018. Simon Dawson/Bloomberg/TNS

Saudi Aramco, the world’s biggest energy company, is selling $6 billion of bonds in its first dollar-denominated Islamic bond sale.

The state-controlled company is offering sukuk due in three, five and 10 years, and the longest portion may yield around 125 basis points above Treasuries, according to a person familiar with the matter. That’s down from initial discussions of around 160 basis points

Order books for the sale are in excess of $55 billion, said the person, who asked not to be identified as the details are private.

The firm is raising cash to help finance its plans to pay out $75 billion in dividends, a commitment that the oil company made to garner support for its initial public offering. Aramco had to reduce spending, cut jobs and sell non-core assets as the spread of the coronavirus and widespread lockdowns curbed demand for oil last year, the main source of revenue for Saudi Arabia.

The price of Brent crude has rebounded, after plummeting to a 21-year low of just below $16 a barrel at one point in 2020. It’s since climbed more than four-fold to over $70 a barrel.

And while Aramco’s first-quarter profits soared — thanks to the recovery in both crude and gas — its free cash flow fell short of the $18.75 billion needed to pay the dividend for the period.

Aramco’s oil revenue accounts for about 40% of Saudi Arabia’s gross domestic product and the recent increase in crude prices may drive this even higher, Bloomberg Intelligence analysts Jaimin Patel and Damian Sassower wrote in a note Tuesday. Saudi Arabia’s plans to reduce its dependence on Aramco will be challenged by the nation’s fiscal deficit, they said.

As an Amazon Associate I earn from qualifying purchases.

WPBloom

Recommended for you

(0) comments

Welcome to the discussion.

Keep it Clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
PLEASE TURN OFF YOUR CAPS LOCK.
Don't Threaten. Threats of harming another person will not be tolerated.
Be Truthful. Don't knowingly lie about anyone or anything.
Be Nice. No racism, sexism or any sort of -ism that is degrading to another person.
Be Proactive. Use the 'Report' link on each comment to let us know of abusive posts.
Share with Us. We'd love to hear eyewitness accounts, the history behind an article.