Saudis emerge from Khashoggi crisis with US$75 billion orders

An employee uses binoculars to look out towards the Arabian Sea in the Port Control Centre at Saudi Aramco’s Ras Tanura oil refinery and terminal in Ras Tanura, Saudi Arabia. (Bloomberg pic)

RIYADH: Saudi Aramco, the world’s largest oil company, has received US$75 billion in orders for its debut bond sale, kickstarting an offering with yields likely to fall in line or below Saudi Arabia’s sovereign debt.

It’s rare for bonds of a state-owned company to yield less than the sovereign debt and the demand reflects intense investor appetite for high-quality paper.

For Saudi Arabia and Aramco itself, the early success in selling the bonds marks a tremendous turnaround after investors, Wall Street bankers and corporate titans briefly shunned the kingdom last year following the assassination of journalist Jamal Khashoggi.

The US has blacklisted 16 Saudi nationals for their role in the Khashoggi murder, according to a statement Monday.

The crisis, along with sliding crude prices, hit the kingdom late last year and in early 2019, with the economy slowing down and investors taking money out of the local stock market.

Now, the situation appears to be reversing, helped by oil rising to more than US$70 a barrel, up from US$50 in December.

As part of its debut in the global debt market, Aramco has offered bonds in six portions, from three to 30 years, according to the people familiar with the matter, who asked not to be identified because the information is private.

Aramco is expected to raise between US$10 billion and US$15 billion, with final pricing and size anticipated on Tuesday afternoon London time.

The company expects to pay about 1.25 percentage points more than US Treasuries for its 10-year notes, compared with Saudi bonds trading at about 1.27 percentage points, the banks selling the debt told investors.

Traditionally, those risk premiums fall in a high-demand bond sale as the process advances, suggesting Aramco may pay even less.