On Wednesday, Saudi Arabian oil giant Aramco sold another $6 billion to fund a large dividend as it returned to the international debt markets with its first USD-denominated sukuk deal, a document showed.
The debt issuance, which would help fund a $75 billion dividend commitment that goes mostly to the government, consists of tranches of three, five and 10 years. It shows a document from one of the banks arranging the deal and was seen by Reuters.
Aramco sold $2 billion in the three-year tranche at 65 basis points over the US Treasuries and $2 billion in five-year paper at 120 Bpls over UST and $3 billion in 10-year paper at 85 bps over UST.
Initial price guidance for the three-year bonds was around 105 bps over UST, around 125 bps over UST for 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 maintained its planned $75 billion dividend on shareholder despite the low oil prices last year and is expected to make significant domestic investments in Saudi Arabia in the plans to transform the economy.
In relation to the negative outlook of available U.S. sukuk issuance programmes, Fitch gave the A 1 rating for negative outlook in May last year and tracking a change in Saudi Arabia's sovereign outlook to negative.
The company has displayed a strong commitment to pay $75 billion in annual dividends, which is, in Moody's view, not sustainable should oil prices drop and remain significantly below $60 bbl, Fitch said.
Interlinkages between Saudi Arabia and the company suggest that any change in the rating outlook on the government of Saudi Arabia would reflect on Saudi Aramco's ratings outlook.
The company chose to issue conventional bonds over Islamic ones due to a low demand for the instrument as a result of the low number of dollar sukuk sales in the Gulf this year, according to one source 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 finance its dividend.
A source told Reuters that the Aramco was expected to raise up to $5 billion with this deal, which had 29 passive and active bookrunners working on it.
Bankers who worked on the deal included Citi, HSBC, JPMorgan, NCB Capital and Standard Chartered Bank. Passive bookrunners included BOC International and Dubai Islamic Bank.