Saudi state oil giant Aramco returned to the debt market on Tuesday after a three-year break, joining other top Gulf companies and governments that have accessed markets this year to fund investments. Aramco engaged banks to sell bonds maturing in 10, 30, and 40 years, according to a document from one of the involved banks. Sources indicate that Aramco is expected to raise at least $3 billion across these three tranches. The company has not yet commented on this matter.
"The timing suggests Aramco is capitalizing on the last opportunity before the summer liquidity dries up," said Zeina Rizk, co-head of fixed income at Amwal Capital Partners. This year, Gulf entities have raised funds in debt markets to leverage favorable conditions, with Saudi Arabia, the leading oil exporter, issuing $12 billion in dollar-denominated bonds in January and $5 billion in sukuk in May.
Aramco, which last accessed global debt markets in 2021 raising $6 billion through a three-tranche sukuk, indicated in February its intention to issue bonds this year. Historically a significant revenue source for the Saudi state, Aramco anticipates declaring $124.3 billion in dividends for 2024, primarily benefiting the Saudi government. Recently, the company awarded $25 billion in contracts for its gas expansion project, announced the acquisition of 10% of Renault and Geely's joint venture Horse Powertrain, and initiated a non-binding deal with U.S. energy firm Sempra for liquefied natural gas.
Aramco's bond sale "likely signals the company's continued aggressive pursuit of acquisitions," according to Yousef Husseini, an analyst at EFG Hermes. A portion of Aramco's dividends also supports the Public Investment Fund (PIF), Saudi Arabia's sovereign wealth fund, which aims to diversify the economy away from oil. The government, which holds approximately 81.5% of Aramco, recently raised $11.2 billion by partially selling its shares, potentially aiding the country's economic diversification under "Vision 2030."
PIF, which has invested billions in various sectors including electric cars and futuristic cities, has raised nearly $8 billion from three debt sales. "Given Saudi Arabia's significant medium-term funding needs for its investment program, despite some timeline extensions, and the lack of expected levels of FDI, accessing debt markets alleviates pressure on domestic funding and liquidity," explained Monica Malik, chief economist at Abu Dhabi Commercial Bank. Citi, Goldman Sachs International, HSBC, JPMorgan Chase, Morgan Stanley, and SNB Capital have been appointed as joint active bookrunners for the bond sale, which includes investor calls on Tuesday for the potential issuance of benchmark-sized notes.
Other banks involved as joint passive bookrunners include Abu Dhabi Commercial Bank, BofA Securities, the Bank of China, Emirates NBD, First Abu Dhabi Bank, GIB Capital, and Mizuho. Aramco's 40-year tranche will be its second-longest dated bond, following $2.25 billion in notes due in November 2070.
