Bond is­sue:

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An em­ployee walks past crude oil stor­age tanks at the Juaymah Tank Farm in Saudi Aramco’s Ras Ta­nura oil re­fin­ery and oil ter­mi­nal in Ras Ta­nura, Saudi Ara­bia. Saudi Aramco plans to tap the debt mar­ket in the sec­ond quar­ter to fi­nance the ac­qui­si­tion of petro­chem­i­cal gi­ant Sabic, likely is­su­ing its first ever in­ter­na­tional bond and dis­clos­ing its ac­counts in the process.

RIYADH: Saudi Aramco plans to tap the debt mar­ket in the sec­ond quar­ter to fi­nance the ac­qui­si­tion of petro­chem­i­cal gi­ant Sabic, likely is­su­ing its first ever in­ter­na­tional bond and dis­clos­ing its ac­counts in the process.

Saudi Ara­bian En­ergy Min­is­ter Khalid Al-Falih re­vealed the plan on Wed­nes­day in Riyadh, adding the com­pany wanted flex­i­bil­ity in fund­ing the Sabic deal, which could cost about US$70bil.

“The Aramco bond is prob­a­bly go­ing to be in US dol­lars,” Al-Falih said.

That debt sale would force the world’s largest oil pro­ducer to dis­close its ac­counts to in­vestors for the first time since its na­tion­al­i­sa­tion roughly four decades ago.

It would also have to make pub­lic de­tails about oil re­serves and op­er­a­tions. The king­dom took a first step in that di­rec­tion on Wed­nes­day by re­leas­ing the first au­dit of Aramco’s oil and gas re­serves since 1980.

The fund­ing pro­gramme “will be sus­tained over time as Saudi Aramco grows and un­der­takes its cap­i­tal pro­gramme,” Al-Falih said.

“We be­lieve that hav­ing bonds and com­mer­cial pa­per as one of its sources of cap­i­tal is pru­dent and nec­es­sary.”

The plans for the bond, first re­ported by Bloomberg News last year, come as the Saudi gov­ern­ment re­ac­ti­vates its plan to sell shares in the com­pany.

Al-Falih re­it­er­ated Crown Prince Mo­hammed Sal­man’s com­ments in 2018 that Riyadh is aim­ing for Aramco’s ini­tial pub­lic of­fer­ing in 2021. The king­dom had ini­tially tar­geted 2018.

Al-Falih didn’t dis­close the size of the po­ten­tial bond sale, but it could rank among the largest is­sued by a com­pany if Aramco plans to fi­nance a large chunk of the Sabic deal with it.

Ver­i­zon Com­mu­ni­ca­tions Inc raised US$49bil in the largest ever cor­po­rate bond sale in 2013 to buy Voda­fone Group Plc’s stake in its cel­lu­lar phone unit.

Anheuser-Busch InBev NV took out US$46bil in 2016 to fi­nance the takeover of SABMiller Plc.

Al-Falih played down chat­ter in the mar­ket that Aramco would fund the en­tire US$70bil Sabic deal with the bond of­fer­ing.

“It’s not go­ing to be any­where near the num­ber that’s been ru­moured,” he said.

The bond, likely to be com­bined with banks loans, would al­low state-owned Aramco to pay the king­dom’s sovereign wealth fund for its 70% stake in Sabic.

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

Aramco has lots of room to bor­row money as it’s vir­tu­ally free of net debt, ac­cord­ing to ac­counts ob­tained by Bloomberg News for the first half of 2017. At that time, the com­pany had about US$20bil of bor­row­ings, off­set by US$19bil of cash and equiv­a­lents.

Aramco has so far largely avoided bond mar­kets, re­ly­ing al­most ex­clu­sively on its own cash or bank loans. The clos­est it has come to is­su­ing debt was when it raised 11.25 bil­lion riyals (US$3bil) in a de­but lo­cal cur­rency Is­lamic bond sale.

The prospec­tus for the 2017 of­fer­ing didn’t in­clude any fi­nan­cial in­for­ma­tion, ac­cord­ing to a copy of the doc­u­ment re­viewed by Bloomberg News.

“We will work with our ad­vis­ers and find the right time to go to mar­ket and part of that would be a prospec­tus that would have ap­pro­pri­ate fi­nan­cial state­ments and dis­clo­sures,” Al Falih said.

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