Informed sources told Bloomberg that Saudi Aramco is likely to accept around $6 billion of the purchase orders it received for dollar-denominated sukuk currently on offer. The sources indicated that the total demand Aramco received for the sukuk amounted to $55 billion.
Aramco, the world's largest energy company, began marketing its first dollar-denominated sukuk issuance, targeting to raise up to $4 billion by offering sukuk across three tranches with maturities of 3, 5, and 10 years, according to a source familiar with the matter who requested anonymity due to the sensitivity of the details. The sources requested confidentiality noted that the pricing for the long-term sukuk was set at 125 basis points above U.S. Treasury bonds, significantly lower than earlier discussions that anticipated pricing at 160 basis points.
A source told Bloomberg that Aramco's decision to issue sukuk instead of traditional bonds is attributed to heightened demand for sukuk due to a scarcity of dollar-denominated sukuk sales from the Gulf this year. Last Monday, Aramco announced the launch of dollar-denominated international sukuk for the first time in its history, stating that these sukuk would be direct, unsecured without recourse to assets, according to a statement released on Monday.
The company indicated that the net proceeds from each sukuk issuance will be used for general corporate purposes or for any other purpose specified in the final terms of the sukuk series.
Saudi Aramco aims to raise liquidity through global debt markets to help finance its commitment to distribute $75 billion in dividends to shareholders. The company was compelled to reduce spending and jobs and sell non-core assets amid the COVID-19 pandemic and widespread lockdowns that limited oil demand last year, the primary source of Saudi Arabia's revenues, according to Bloomberg.
Brent crude prices have revived after falling to a 21-year low of just below $16 per barrel in 2020. Since then, prices have more than quadrupled to over $70 per barrel.
Aramco's oil revenues represent about 40% of Saudi Arabia's GDP, and the recent increase in crude oil prices could raise this percentage, analysts at Bloomberg Intelligence, Jaymin Patel and Damian Sassower wrote in a note on Tuesday. They noted that Saudi Arabia's plans to reduce dependence on Aramco will face challenges due to the country's fiscal deficit.
