RIYADH: Energy giant Saudi Aramco has completed the issuance of a $6 billion US dollar-denominated international bond, marking the state oil firm’s return to the debt market after a hiatus of three years.
In a Tadawul statement, the company revealed that the offerings, which began on July 9 under the firm’s Global Medium Term Note program, will be traded on the London Stock Exchange.
The last time Aramco tapped the debt market was in 2021 when it raised $6 billion from a three-tranche sukuk, also known as an Islamic bond.
Governments and companies operating in the Middle East region have been eager to leverage debt markets this year amidst declining global interest rates. As part of this trend, Saudi Arabia issued $12 billion in dollar-denominated bonds in January.
Aramco Executive Vice President of Finance and Chief Financial Officer Ziad T. Al-Murshed, said: “We are pleased with the strong interest and level of engagement from investors globally, both existing and new. Our order book exceeded $33 billion at its peak, reflecting Aramco’s exceptional financial resilience and fortress balance sheet.”
He added: “Achieving a negative issue premium across all tranches is a testament to our unique credit proposition. We have consistently demonstrated our financial discipline, while delivering on shareholder value and business growth, and we aim to maintain a strong investment-grade credit rating across business cycles.”
Aramco disclosed that the bonds will have a minimum subscription of $200,000.
These financial instruments have three $2 billion senior notes, which are expected to provide a yield of 5.25 percent, 5.75 percent, and 5.87 percent for bonds maturing in 10, 30, and 40 years, respectively.
This follows a comment made by Al-Murshed in February that the company could potentially issue longer-term bonds of up to 50 years and might offer these financial instruments in 2024 as market conditions improve.
“We’re always prioritizing longer term over short term. The timeframe I don’t want to give you exactly but it’s not very far away. Likely in 2024,” said Al-Murshed at that time.
The company revealed that the latest offering was more than six times oversubscribed, based on the initial targeted size of $5 billion.
Aramco added that the transaction received strong demand from a diverse base of investment-grade-focused institutional investors, with all three tranches favorably priced with a negative new issue premium, reflecting the company’s strong credit profile.
Aramco, in the latest statement, said that the bonds will be issued in accordance with Rule 144A/Reg S offering requirements under the US Securities Act of 1933, as amended.
This security act aims to ensure that investors have financial and other important information about securities that are being sold publicly.
The company further noted that the issuance also complies with the stabilization rules of the Financial Conduct Authority and the International Capital Market Association.
The bonds offer various redemption options at maturity, upon an event of default, or for tax reasons, including the issuer’s call, maturity par call, and make-whole call.
In June, Aramco also sold over $10 billion worth of shares in its second public offering. The 1.55 billion shares on offer represented 0.64 percent of the company’s issued shares.
