Demand for Aramco international bond 'north of' $30bn, Saudi minister says
Demand for Saudi Aramco's inaugural international bond, seen as a gauge of potential investor interest in the giant oil company's eventual initial public offering, is higher than $30bn, Saudi Energy Minister Khalid al-Falih said on Monday.
State-owned Saudi Aramco met investors last week in a global bond roadshow ahead of the issue, seeking to reassure them after the murder of Saudi journalist Jamal Khashoggi in October and a sweeping crackdown against dissent in the kingdom.
Neither banks nor investors appear to have been deterred from participating in the high-profile deal, despite initial displays of outrage from companies such as JPMorgan over the death of Khashoggi in the Saudi consulate in Istanbul.
The $30bn figure would represent an oversubscription of three times the size of the bond, if Aramco sticks to its plan to issue around $10bn in the debt sale, due this week.
Speaking at an event in Riyadh, Falih said the issue, which was announced last week, will close on Wednesday and that he believed demand for the bond was "north of" $30bn.
In part due to international condemnation of the Khashoggi killing, Aramco last year postponed a planned initial public offering to 2021, citing unfavourable market conditions.
"The success of this bond issue will be the litmus test and a crucial precursor for the anticipated Aramco IPO within the next two years," said Salah Shamma, head of investment, MENA equities, at Franklin Templeton.
Earlier this month it was announced that Aramco is now the most profitable company in the world, surpassing Apple's profits of about $60bn, according to credit agencies who gained access to the company's secretive account.
Credit rating agencies Fitch and Moody both made a first-ever assessment of Aramco in a bond prospectus handed to investors after they gained access to the company's accounts.
Analysts said the international bond had been designed to help raise funds for a down payment on Aramco's $69.1bn purchase of a majority stake in Saudi petrochemicals firm SABIC, which was announced last month.
Aramco has agreed to buy a 70 percent stake in SABIC from Saudi Arabia's sovereign wealth fund, known as the Public Investment Fund (PIF).
The purchase effectively merges the kingdom's two largest companies, handing PIF around the same amount it had expected from the much-delayed Aramco IPO.
The SABIC deal, originally mooted last year, lends Crown Prince Mohammed bin Salman greater fiscal flexibility to pursue his "Vision 2030".
Under that scheme, the crown prince and PIF say they aim to create jobs and diversify the largest Arab economy beyond oil exports.
The CIA concluded last autumn that bin Salman was behind Khashoggi's murder.
Bin Salman has denied any knowledge of the killing or its botched cover-up, which Riyadh has described as a "rogue operation".
Falih said in addition to SABIC, there will be other assets, "non-strategic assets," that PIF may exit.
PIF has invested in ride-hailing firm Uber Technologies and in electric carmakers Lucid Motors and Tesla.
"So don't be surprised, just as bold as they were in entering some of these investments, that they do exit," said Falih.