
Saudi Aramco’s Abha bulk plant is located near the Red Sea in southwest Saudi Arabia in late 2018. (Source: Saudi Aramco)
Saudi Aramco has selected banks to arrange its first international debt sale, which will help it finance the acquisition of a stake in Saudi Arabian Basic Industries Corp. (SABIC), two sources familiar with the matter said Feb. 14.
The state oil giant has picked a group of banks including JPMorgan, Morgan Stanley, Citi, HSBC and Saudi Arabia's National Commercial Bank, the sources said.
JPMorgan and Morgan Stanley have been appointed joint global coordinators and, together with the other banks, joint bookrunners, said one of the sources.
JPMorgan, Morgan Stanley and HSBC declined to comment. Aramco and the other banks did not immediately respond to requests for comment.
Aramco, the world’s top oil producer, plans to issue its first international bonds in the second quarter of 2019, likely worth about $10 billion, Saudi Energy Minister Khalid al-Falih said last month.
Sources previously told Reuters the oil giant could borrow as much as $50 billion from international investors to fund the purchase of all, or nearly all, of the 70% stake in SABIC held by the Public Investment Fund, the kingdom’s top sovereign wealth fund.
Based on the type of fees banks gained on previous bond deals issued in the Gulf, fees could go up to roughly $1 million for each bookrunner, should the Aramco bond be in the vicinity of $10 billion.
But banks have pitched hard over the past few months for this high-profile bond mandate—not so much for the fees, but in the hope of being rewarded by Aramco with future mandates for capital markets transactions and other banking business such as foreign exchange and investment services.
JPMorgan and Morgan Stanley, along with other banks, were working on the planned stock market listing of Aramco before the move was put on hold. The new planned listing date is 2021, Saudi officials have said.
An international bond sale by Aramco will almost certainly require the company to obtain a credit rating and disclose financial information in a prospectus.
Aramco has so far been reluctant to disclose many details of its finances. Concern about disclosure requirements was one reason that Aramco shelved the plan for a public offer of its shares last year.
CEO Amin Nasser said last month that Aramco was talking to credit rating agencies ahead of its debut on the international capital markets.
Aramco expects to match the ratings of Exxon Mobil Corp. (NYSE: XOM) and Royal Dutch Shell Plc (NYSE: RDS.A), a source familiar with the matter said, but bond market investors expect Aramco to have a similar, if not lower, rating than Saudi Arabia.
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