Saudi Aramco plans to issue global bond

Bloomberg

Fri, Jan 11, 2019 - Page 10

Saudi Aramco plans to tap the debt market in the second quarter to finance the acquisition of petrochemical giant Sabic, likely issuing its first ever international bond and disclosing its accounts in the process.

Saudi Arabian Minister of Energy Khalid al-Falih revealed the plan on Wednesday in Riyadh, saying that the company wanted flexibility in funding the Sabic deal, which could cost about US$70 billion.

“The Aramco bond is probably going to be in US dollars,” al-Falih said.

That debt sale would force the world’s largest oil producer to disclose its accounts to investors for the first time since its nationalization roughly four decades ago. It would also have to make public details about oil reserves and operations. The kingdom on Wednesday took a first step in that direction by releasing the first audit of Aramco’s oil and gas reserves since 1980.

The funding program “will be sustained over time as Saudi Aramco grows and undertakes its capital program,” al-Falih said. “We believe that having bonds and commercial paper as one of its sources of capital is prudent and necessary.”

The plans for the bond, first reported by Bloomberg News last year, came as the Saudi Arabian government reactivates a plan to sell shares in the company.

Al-Falih reiterated Saudi Arabian Crown Prince Mohammed bin Salman’s comments last year that Riyadh is aiming for Aramco’s initial public offering (IPO) in 2021.

Al-Falih did not disclose the size of the potential bond sale, but it could rank among the largest issued by a company if Aramco plans to finance a large chunk of the Sabic deal with it.

Al-Falih played down chatter in the market that Aramco would fund the entire US$70 billion Sabic deal with the bond offering.

“It’s not going to be anywhere near the number that’s been rumored,” he said.

The bond, likely to be combined with bank loans, would allow state-owned Aramco to pay the kingdom’s sovereign wealth fund for its 70 percent stake in Sabic. In turn, the Public Investment Fund would obtain the money it had initially hoped to raise from the Aramco IPO.

Aramco has so far largely avoided bond markets, relying almost exclusively on its own cash or bank loans. The closest it has come to issuing debt was when it raised 11.25 billion riyals (US$3 billion) in a debut, local-currency, Islamic-bond sale.

“We will work with our advisers and find the right time to go to market, and part of that would be a prospectus that would have appropriate financial statements and disclosures,” al-Falih said.