Oil giant Aramco locked up another $6 billion on Wednesday to 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 is expected to help finance 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 completing the deal and seen by Reuters.
Aramco sold $1 billion in the three-year tranche at 65 basis points over UST$ $ 2 billion in the 5-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 five-year bonds, around 125 bps over UST for the three-year notes and about 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 increased its promised $75 billion dividend to shareholders last year despite the lower oil prices and is expected to shoulder substantial domestic investments in Saudi Arabia's plans to transform the economy. Fitch assigned Saudi Arabia's Suuk issuance programme an A 1 rating with a negative outlook, in line with the current Aramco ratings and tracking a change in the SASURANK PHOLLOWING outlook into negative in May last year.
The company has shown a strong commitment to pay $75 billion in annual dividends, which is not sustainable in Fitch’s view if oil prices will fall and stay below $60 bbl, Moody said.
Saudi Arabia's interlinkages with the company mean that any change of the rating outlook on the government of Saudi Arabia would be mirrored on the ratings outlook of Saudi Aramco.
The company chose to issue conventional bonds over Islamic ones due to a high demand for the instrument as a result of the low number of dollar sukuk sales in the Gulf this year, Reuters told Monday. The Aramco was widely expected to become a sustainable bond issuer after its debut $8 billion issuance in 2019 was followed by an $8 billion, five-part transaction in November last year, also used to finance its dividend.
A source told Reuters that Aramco was expected to raise up to $5 billion with the deal, which worked on it 29 active bookrunners and passive bookrunners. The active bookrunners on the deal included Citi HSBC JPMorgan NCB Capital and Standard Chartered Bank The Passive Bookrunners included Dubai Islamic Bank and BOC International.