Saudi Aramco has announced the issuance of international dollar-denominated sukuk for the first time in its history, with the offering process beginning today, Monday, and lasting for 10 days until June 17. According to a statement issued today, these sukuk will be direct and unsecured without recourse to the assets. Aramco specified a minimum subscription amount of $200,000 and mentioned that the price of the sukuk, the nominal value, the yield, and maturity duration will be determined based on market conditions.
The net proceeds from each sukuk issuance will be used for the general purposes of Aramco or for any other purpose specified in the final terms of the sukuk series. Aramco has appointed 13 local and international managers for the anticipated sukuk issuance, including Alinma Investment, Al Rajhi Capital, BNP Paribas, Citigroup, First Abu Dhabi Bank, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, NCB Capital, Riyad Capital, SMBC Nikko, and Standard Chartered as joint lead managers to organize a series of meetings with fixed-income investors starting today, June 7.
According to the statement, the sukuk offering will be limited to qualified investors in the countries where the issuance will take place, in accordance with the applicable regulations and rules in those countries. An application will be made for the acceptance of these sukuk on the official list of the UK Financial Conduct Authority and the London Stock Exchange for trading in the main financial market in London.
Sources speaking to Bloomberg previously estimated that state-controlled Aramco aims to raise about $5 billion as part of the company’s efforts to generate liquidity to support its commitment to distribute $75 billion in dividends to shareholders, a pledge the company made when it conducted its initial public offering. However, with the spread of the coronavirus and wide-scale lockdowns that limited oil demand last year, Brent crude prices fell to just below $16 per barrel, the lowest level since 1999.
Several other state-owned energy companies in the Gulf Arab states are also considering issuing international bonds; Qatar Petroleum may issue up to $10 billion in the coming weeks, while Oman’s Energy Development Company is seeking to raise about $3 billion. Aramco's profits rose in the first quarter of this year amid a recovery in global oil and gas markets, even though its free cash flow remained very low to fully cover its dividends for the period of $18.75 billion. Almost all of the company’s payments go to the Saudi government, which is attempting to reduce a budget deficit that widened to 12% of GDP last year.
