Saudi Aramco markets five-tranche dollar bonds: document

Aramco plans debt market comeback with multi-tranche bond deal - The Jakarta Post

Saudi Aramco plans debt market comeback with multi-tranche bond deal

Saudi Aramco kicked off a jumbo bond sale Tuesday to help fund a $75 billion dividend, returning to the debt markets for the first time since April of past year.

Aramco, which hired banks including Goldman Sachs Group Inc. for the sale, needs to raise debt after slumping crude prices caused profit to fall by 45% in the third quarter. That's left it unable to generate enough cash to fund investor payouts, nearly all of which go to the Saudi Arabian government, which needs the money to plug a widening budget deficit and prop up a slumping economy.

Aramco gave initial price guidance of around 140 basis points (bps) over US Treasuries (UST) for a three-year tranche, around 155 bps over UST for five-year bonds, around 175 bps over UST for 10-year notes, around 205 bps over UST for a 30-year tranche and around 230 bps over UST for 50-year bonds.

"Any potential bond offering would be part of the company's overall funding strategy within its normal course of business and subject to market conditions", Aramco told Reuters in an emailed statement when asked for details about the issue.

Benchmark Brent oil has dropped nearly 35% this year to around $44 a barrel, with the coronavirus pandemic and lockdowns sapping demand for energy.

"In a world searching for yield there should be no shortage of demand".

The yield on Aramco's $3 billion of bonds due in 2029 has dropped to 2.09% from 3.04% at the start of the year.

It received $48.1 billion in orders for the debt sale, less than half what it drew for its debut bond sale previous year, when it raised $12 billion, a document issued by one of the banks leading the deal showed. But the spreads on Aramco's new bonds should still compensate any investors wary that President-elect Joe Biden might increase regulations on oil and gas companies, according to Bank of Singapore.

Since the onset of the pandemic, Aramco's dividend payout has become even more crucial to the Saudi government, which has had to contend with higher costs related to a national lockdown and a stimulus effort to boost the economy. The plan, dubbed "Project Seek", could involve Aramco selling a stake in its infrastructure to investors who would receive a regular payout from the company as it leases the asset, these people said. The sale prospectus also opened the books on Aramco's once-secretive financials, showing it was then the world's most profitable company and whetting the appetite for equity investors ahead of last December's share offering. Unless prices rise further, the government may not be able to rely on the annual dividend of nearly $75 billion beyond next year, Moody's Investors Service said last month.

The other banks chosen by Aramco as active bookrunners for the new deal are Citigroup Inc., HSBC Holdings Plc, JPMorgan Chase & Co., Morgan Stanley and Riyadh-based NCB Capital.

-With assistance from Shaji Mathew.

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