Aramco Secures $31 Billion In Orders For Bond Offering

By Irina Slav of OilPrice.com

Saudi Aramco has attracted orders worth a total $31 billion for a fresh bond the company said it would place on international markets. The size of the bond was $6 billion.

In its first debt offering in three years, the Saudi energy giant offered 10- and 30-year notes, with offers for both topping $11 billion, Bloomberg reported, citing an unnamed source familiar with the deal. The company also offered investors a 40-year note in the tranche.

Initially, plans were to offer some 140 basis points over U.S. Treasuries for the 10-year bond, 180 basis points over UST for the 30-year bond, and 195 basis points for the 40-year note. However, thanks to strong investor interest, the spreads were tightened to 105 basis points for the 10-year note, 145 basis points for the 30-year note, and 155 basis points for the 40-year note.

According to early reports about the bond offering, the proceeds would go towards refinancing existing debt and helping the investment program of the world’s largest oil company by market value and production.

"Aramco is extending maturities as it will continue to gradually leverage up given their expansion plans and capex needs," the managing director of fixed income advisory at Union Bancaire Privee told Bloomberg.

Aramco is a major source of income for the Saudi government that has large-scale plans for the diversification of the Saudi economy. The Saudi government holds 81.5% directly in Aramco with another 16% held by the kingdom’s sovereign wealth fund—the Public Investment Fund. Per Reuters, Aramco plans to pay some $124.3 billion in dividends this year.

A month before the bond announcement, Aramco said it would also offer more stock to investors. The offering, priced at a discount, raised over $12.3 billion for the Saudi company. The initial proceeds came in at $11.2 billion, but the offering had an over-allotment option that kicked in, bringing the total to $12.35 billion.