ARAMCO MULLS FIRST GLOBAL BOND SALE

But move may force oil giant to disclose accounts, details about reserves to investors

SAUDI Aramco is weighing tapping the international bond market for the first time to finance the acquisition of Saudi Basic Industries Corp (Sabic), a move into global capital markets that could offer an alternative to an initial public offering (IPO), said sources.

If Aramco goes ahead with an international bond — potentially among the biggest ever done by a corporate issuer — the sale would force the world’s largest oil producer to disclose its accounts to investors for the first time since nationalisation four decades ago as well as many other details about oil reserves and operations.

The plans for a bond, likely to be combined with banks loans, are very preliminary but would allow it to raise cash to pay the country’s sovereign wealth fund for the 70 per cent stake it owns in Sabic, valued at about US$70 billion (RM284.22 billion).

In turn, the Public Investment Fund would obtain the money it had initially hoped to raise from the Aramco IPO, said sources.

Aramco hasn’t yet started talks about the size of any bond, which would depend on how large a stake it buys in Sabic and how much the banks are willing to lend directly.

The Aramco-Sabic deal could give Saudi Crown Prince Mohammed Salman a shrewd way to avoid an IPO that has proven far more difficult than envisaged, while still raising cash for the sovereign wealth fund.

The main difference would be the origin of the cash: rather than equity investors, it would come from bank loans and bond investors.

Aramco has so far largely avoided bond markets, relying almost exclusively on its own cash or bank loans. The closest it has come to issue debt is last year when it sold a debut local currency Islamic bond.

The prospectus for the sukuk last year, which raised about 11.25 billion riyals (RM12.19 billion), didn’t include any financial information on Aramco, a copy of the document reviewed by Bloomberg showed.

Today, Aramco is almost entirely debt free, according to accounts obtained by Bloomberg News for the first half of last year.

At that point, the company reported total borrowings of US$20.2 billion at the end of the first half of last year, offset by cash and cash equivalents of US$19 billion.