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Saudi Aramco raises $6 billion with debut sukuk

06/09/2021 | 04:50am EDT

DUBAI, June 9 (Reuters) - Saudi Arabian oil giant Aramco locked in another $6 billion on Wednesday to help fund a large dividend as it returned to the international debt markets with its first U.S. dollar-denominated sukuk sale, a document showed.

The debt issuance, which will help fund a $75 billion dividend commitment that will mostly go to the government, comprises tranches of three, five and 10 years, a document from one of the banks arranging the deal and seen by Reuters showed.

Aramco sold $1 billion in the three-year tranche at 65 basis points (bps) over U.S. Treasuries (UST), $2 billion in the five-year portion at 85 bps over UST and $3 billion in 10-year paper at 120 bps over UST.

Initial price guidance was around 105 bps over UST for the three-year bonds, around 125 bps over UST for the five-year notes and around 160 bps over UST for the 10-year tranche.

The spreads were tightened after the deal attracted combined orders of more than $60 billion.

Aramco last year maintained its promised $75 billion annual dividend to shareholders despite lower oil prices, and is expected to shoulder significant domestic investments in Saudi Arabia's plans to transform the economy.

Moody's assigned Aramco's sukuk issuance programme an A1 rating with a negative outlook, in line with the negative outlook on existing Aramco ratings and tracking a change in Saudi Arabia's sovereign outlook to negative in May last year.

"The company has displayed a strong commitment to pay $75 billion in annual dividends, which in Moody's view is not sustainable should oil prices fall and remain significantly below $60/bbl," Moody's said.

"Interlinkages between Saudi Arabia and the company imply that any change in rating outlook on the government of Saudi Arabia would be mirrored on Saudi Aramco's rating outlook."

The company chose to issue Islamic bonds over conventional ones due to high demand for the instrument as a result of the low number of dollar sukuk sales in the Gulf this year, a source told Reuters on Monday.

Aramco has been widely expected to become a regular bond issuer after its debut $12 billion issuance in 2019 was followed by an $8 billion, five-part transaction in November last year, also used to fund its dividend.

A source had told Reuters that Aramco was expected to raise up to $5 billion with the deal, which had 29 active and passive bookrunners working on it.

Active bookrunners on the deal included Citi, HSBC , JPMorgan, NCB Capital and Standard Chartered Bank. Passive bookrunners included BOC International and Dubai Islamic Bank. (Reporting by Yousef Saba in Dubai and Scott Murdoch in Hong Kong; Editing by Edwina Gibbs, Jan Harvey and Elaine Hardcastle)

© Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
ABU DHABI COMMERCIAL BANK PJSC 2.48% 7.02 End-of-day quote.13.23%
ALAHLI CAPITAL - AL-AHLI REIT FUND -0.33% 12.24 End-of-day quote.37.22%
ALINMA BANK 0.37% 21.7 End-of-day quote.34.12%
BNP PARIBAS -1.19% 51.45 Real-time Quote.20.80%
BOC INTERNATIONAL (CHINA) CO., LTD -2.56% 14.86 End-of-day quote.-46.32%
CRÉDIT AGRICOLE S.A. -1.01% 11.76 Real-time Quote.15.12%
DUBAI ISLAMIC BANK P.J.S.C. 1.68% 4.83 End-of-day quote.4.77%
FIRST ABU DHABI BANK P.J.S.C. 1.97% 16.58 End-of-day quote.28.53%
GIB CAPITAL GROUP, INC. -19.99% 1.2001 Delayed Quote.76.47%
HSBC HOLDINGS PLC -0.89% 397.45 Delayed Quote.5.85%
JPMORGAN CHASE & CO. -0.80% 151.78 Delayed Quote.20.41%
LONDON BRENT OIL -0.82% 75.16 Delayed Quote.44.56%
MITSUBISHI UFJ FINANCIAL GROUP, INC. -1.06% 578.5 End-of-day quote.26.84%
MIZUHO FINANCIAL GROUP, INC. -0.35% 1565.5 End-of-day quote.19.73%
RIYAD BANK 0.19% 26.2 End-of-day quote.29.70%
SAFWA ISLAMIC BANK -1.70% 1.73 End-of-day quote.23.57%
SAUDI ARABIAN OIL COMPANY -0.14% 34.85 End-of-day quote.-0.43%
SOCIÉTÉ GÉNÉRALE -0.86% 24.725 Real-time Quote.46.52%
STANDARD CHARTERED PLC -1.10% 432 Delayed Quote.-6.25%
SUMITOMO MITSUI FINANCIAL GROUP, INC. -0.67% 3695 End-of-day quote.15.90%
THE SAUDI NATIONAL BANK 1.10% 55 End-of-day quote.26.87%
WTI 0.53% 73.659 Delayed Quote.50.25%
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