Aramco has won about $60 billion of orders for its closely watched debut bond sale, far outstripping the $10 billion targeted by the Saudi oil giant, as investors appeared to shrug off its ambitious pricing and early concerns about government influence over the state-backed company, Wall Street Journal informs.
The bonds have attracted more support among traditional debt investors, who could compare it to other investment-grade oil companies, than it has among specialist emerging-markets funds, which may already own Saudi government debt, according to potential investors and people familiar with the matter.
The bond sale is expected to close Tuesday and involves six different bond types, with maturities ranging from three years to 30 years, according to potential investors.
The yields available on the bonds are all close to those on Saudi government debt of similar maturities, according to initial price guidance given to potential investors Monday. That is unusual because state-backed companies normally pay more to borrow money than their governments do, especially when they are a first-time bond issuer, the Journal adds.
However, the low yields left specialist emerging-markets investors cold. “For developed market investors who can’t buy the sovereign or for corporate-only investors it makes sense, but for global EM accounts where you can buy the sovereign, or other middle-east oil companies there’s more value to be had elsewhere,” said Uday Patnaik, head of emerging-market debt at U.K.-based asset manager LGIM.
The pricing suggests Aramco’s bankers are using international oil companies, such as Exxon Mobil Corp. or BP PLC, as a comparison rather than the Saudi government, according to Alberto Bigolin, head of fixed income for Middle East and North Africa at Exotix Capital, an emerging-market investment bank.
“This is a deliberate strategy from the Saudis because they want to have a different pool of investors than the Saudi government bonds,” Bigolin said.
The bond sale will help finance Aramco’s $69 billion purchase of another Saudi state-controlled company, the petrochemical maker Saudi Basic Industries Corporation. The deal will end up raising cash for the country’s sovereign wealth fund, which owns a majority stake in Sabic, as the chemical company is known, the New York Times writes.
Potential investors were told last week that Aramco wanted its bonds to yield very close to or less than Saudi sovereign debt. Several emerging-markets investors said at the time that sounded ambitious, but Monday’s guidance suggested Aramco is likely to achieve its aim, the Journal adds.
The 10-year Aramco bond was initially set to yield marginally less than Saudi’s 10-year government bond. Initial guidance was more generous for the five-year bond, suggesting Aramco’s debt would yield about 0.27 percentage points more than the government bond. However, investors expected the yields to be reduced before the bonds were priced because of high demand.
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