Saudi Aramco bond sale attracting record demand: bank source

Saudi Aramco bond sale attracting record demand: bank source

Before the Six-part Bond deal was disclosed on Monday, Saudi Energy Minister, Khalid al-Falih expressed that the initial indications of interest valued at about $10 Billion. That would be the highest order book value since a record issuance by Qatar past year, which attracted around $52 billion in orders.

"Purely on figures, it is a fantastic credit", said Damien Buchet, CIO of the EM Total Return Strategy, Finisterre Capital.

But he added: "The thing is, they are part of Saudi Arabia, they are a government arm. For equity investors this is always going to be an issue, more so than for bond investors".

That would represent an oversubscription of three times the size of the bond, if Aramco sticks to its plan to issue around $10-billion in the debt sale, due this week.

The state-owned company generated the most profit of any corporation in the world in 2018 with income of $111.1 billion - more than Apple Inc., Google's parent Alphabet Inc. and Exxon Mobil Corp. combined.

Having made core earnings of $224 billion a year ago and with $86 billion in free cash flow at the end of 2018, Aramco does not need to borrow.

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The investor clamour raised even more interest than the Kingdom's sovereign bond market debut in 2016, which drew offers worth more than $67bn, and trounced the $52bn interest in the $12bn deal offered by Gulf rival Qatar.

The main question now is whether Aramco even needs to go public, or whether the unusual acquisition of a almost 70-percent stake in Saudi Arabia's Sabic petrochemicals giant means it's sidelined IPO plans altogether.

The order book for Aramco expanded from about $40 billion when the deal kicked off, people with knowledge of the deal said. It said it will pay for most of the SABIC purchase in cash.

The purchase effectively merges the kingdom's two largest companies, handing PIF around the same amount it had expected from the much-delayed Aramco IPO.

The offering also comes ahead of a planned IPO where Aramco will offer part of its shares in worldwide stock markets in about two years. The bonds, which range in maturity from three to 30 years, are expected to attract demand from both emerging markets and investment-grade buyers. The offering also includes a three-year floating rate bond.

Aramco has lined up a roster of worldwide investment banks supporting its jumbo bond deal, which suggests the mood around dealing with Saudi Arabia is changing as the impact of the Khashoggi crisis ebbs. JP Morgan, Morgan Stanley, HSBC, Citi, Goldman Sachs and National Commercial Bank have been chosen to arrange the bond issue.

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