(Bloomberg) — Saudi Aramco pulled in more than $31 billion of orders for its $6 billion bond sale, its first dollar-debt offering in three years.
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Bids peaked above $11 billion for both the oil giant’s 10- and 30-year notes, according to a person with knowledge of the matter. Aramco also sold 40-year bonds in the deal that priced Wednesday.
The strong demand — final order books topped $23 billion — allowed the company to cut spreads offered on each of the tranches by at least 35 basis points. The deal was its first dollar debt sale since a $6 billion offering in 2021.
Here are the details of Wednesday’s offering:
An Aramco spokesperson didn’t comment on the size of the transaction, and referred Bloomberg to a company statement earlier this week announcing that it planned to sell notes. The deal is extending the oil-rich kingdom’s debt spree as it looks to fund projects.
“Aramco is extending maturities as it will continue to gradually leverage up given their expansion plans and capex needs,” according to Apostolos Bantis, managing director of fixed income advisory at Union Bancaire Privee Ubp SA.
Saudi Arabia’s government and affiliated companies have borrowed vast amounts this year, and as of June had topped China as the biggest issuer of international debt among emerging markets. The state, which needs funds to help cover an expected budget shortfall resulting from an ambitious economic diversification plan, has accounted for more than half of the total debt sold by Saudi entities this year.
Aramco is a big part of the kingdom’s cash flow plans. In June, the Saudi government offloaded a stake in the company that eventually brought in $12.35 billion, while the company’s massive dividend payouts — the biggest in the world — also help fill state coffers.
Aramco maintained its $31 billion quarterly dividend to the Saudi government and other investors in May despite lower profit. Its free cash flow — funds from operations minus capital expenditure — of $22.8 billion in the period was less than the total payout.
Aramco sold its first dollar bond in 2019, and followed it with a 50-year debt offering in 2020. It issued dollar-denominated Islamic notes in 2021, data compiled by Bloomberg show.
The company hired banks including Citigroup Inc., Goldman Sachs Group Inc., HSBC Holdings Plc, JPMorgan Chase & Co., Morgan Stanley and SNB Capital to manage the latest bond sale.
Aramco is likely to use the funds to refinance existing borrowings and contribute to its investment program. The company is expanding natural gas production at home including $25 billion of contracts for the Jafurah project. It’s spending billions to maintain oil output and pursuing acquisitions overseas, including tapping into LNG supply in the US and agreeing to take a share in an automotive joint venture.
Chief Financial Officer Ziad Al-Murshed said in February that the company would sell long-dated debt this year as financial markets improve and the company looks to boost leverage on its balance sheet. The plan to issue long-maturity bonds shows Aramco is confident it can remain relevant well past the middle of the century even as the energy transition raises questions over future oil demand.
–With assistance from Olivia Raimonde and Archana Narayanan.
(Adds final pricing and order book in the second and third paragraphs.)
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