Saudi Aramco was set to raise $8 billion from a five-part bond deal on Nov. 17 as the world’s largest oil producer seeks cash after low oil prices dented its finances.
It received $48.1 billion in orders for the debt sale, less than half what it drew for its debut bond sale last year, when it raised $12 billion, a document issued by one of the banks leading the deal showed.
The move is part of an onslaught on international debt markets by Gulf issuers seeking to plug finances hit by the pandemic and weak oil prices, which has pushed regional issuance past last year’s record to surpass $100 billion.
Aramco, which reported a 44.6% slump in third-quarter profit, needs the money to pay dividends of $37.5 billion for the second half of 2020 and fund its $69.1 billion purchase of 70% of Saudi Basic Industries (SABIC).
It also raised a loan of $10 billion this year, to be paid in installments until 2028, to back that acquisition.
Aramco sold $500 million in three-year bonds at 110 basis points (bps) over U.S. Treasuries (UST), $1 billion in five-year bonds at 125 bps over UST, $2 billion in 10-year notes at 145 bps over UST, $2.25 billion in 30-year bonds at 3.3% and $2.25 billion in a 50-year tranche at 3.55%, the document showed.
“I think the shorter-end is offering a bit more value than the longer-dated bonds to where the existing bonds are trading,” said Max Wolman, senior portfolio manager at Aberdeen Asset Management.
Aramco tightened the spreads on the tranches with maturities of three, five and 10 years by 30 bps from where it began marketing them earlier on Nov. 17. The spreads on the 30- and 50-year tranches were tightened by around 40 bps.
Last year, Aramco priced its debut bonds inside the Saudi government’s debt curve, but this bond sale was wider.
The 50-year tranche is the longest-dated international debt issued by Saudi Arabia. In April, it issued a 40-year bond tranche - at the time the longest-dated dollar issuance by a Gulf borrower, only to be overtaken by a 50-year tranche by Abu Dhabi in August.
Citi, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, NCB Capital were hired as active book runners.
Other banks involved in the deal include BNP Paribas, BOC International, BofA Securities, Credit Agricole, First Abu Dhabi Bank, Mizuho, MUFG, SMBC Nikko and Societe Generale.
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