ARAMCO SET FOR JUMBO DEBT DEAL
Group may start potential US$10b offering this week, receives over US$26b interest
IN a bond sale closely watched by investors globally, Saudi Arabian Oil Co (Aramco) and its bankers are preparing to kick off what could be at least a US$10 billion (RM41 billion) offering this week.
Early indications suggest investors are already crowding in.
A message circulated among investors on Friday said interest in the most highly anticipated sale of the year already totalled more than US$26 billion, according to people with direct knowledge of the matter.
The state-owned oil giant and bankers spent the previous week drumming up support for its debut offering at presentations in cities ranging from New York and Chicago to Singapore and Tokyo.
The success of the sale is hugely important for banks, such as JPMorgan Chase & Co, that are working on the company’s behalf. They are eager to run an initial
public offering (IPO) by Aramco — the world’s most profitable company — if and when it comes, which would bring lucrative fees for the selected banks. In a rare appearance that underlines the bond sale’s significance, JPMorgan chief executive officer Jamie Dimon spoke at a lunch on Thursday, here, to market the deal, according to one of the people.
Morgan Stanley, Citigroup Inc, Goldman Sachs Group Inc, HSBC Holdings Plc and NCB Capital Co are also managing the bond sale, according to a prospectus seen by Bloomberg News.
The initial price talk on the bond may be announced today, with pricing as early as tomorrow, said the people. Representatives of the company declined to comment on the sale process.
“It will be definitely a jumbo deal with at least four tranches,” said Sergey Dergachev, a senior portfolio manager at Union Investment Privatfonds GmbH in Frankfurt. “Demand should be huge.” He speculated that demand could even surpass the record US$53 billion in bids that Qatar received for its US$12 billion bond sale last year.
Aramco is turning to the dollar bond market as the company is starting to raise cash ahead of the purchase of a US$69 billion majority stake in domestic petrochemical giant Sabic. The bond sale represents an alternate way for Saudi Arabia to raise money and diversify from oil after an IPO of Aramco was postponed last year.
Saudi Arabia has valued Aramco at a whopping US$2 trillion, though not all investors are convinced it’s worth that much.
The bond sale will extend the already record start for issuers from the Gulf Cooperation Council — exceeding US$30 billion so far this year. It caps four consecutive years of bond sales from the kingdom, most recently pricing US$7.5 billion in international bonds in January.
While demand for the bonds is likely to be high, investors remain torn on whether that interest will allow Aramco to pay yields lower than what its owner does, the Saudi Arabia government. On the one hand, Aramco is immensely profitable and produces endless cash flow.