Aramco breaks record as demand for its bond tops $85 billion

Aramco breaks record as demand for its bond tops $85 billion”

Aramco made $111 billion in net profit past year, making it the most profitable company in the world.

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

Sergey Dergachev, functional head of EM corporate debt at Union Investment, said he expected the bond to have four tranches of three, five, 10 and 30 years and to range between $10-billion and $15-billion in size.

Aramco was expected to raise around $10 billion from the deal, which will be priced later in the day and is seen as a gauge of potential investor interest in the Saudi company's eventual initial public offering.

The company opened up a six-stage bond sale on Monday, with investors across Europe, Asia and North America pledging over $30 billion on the first day.

Saudi Aramco's landmark deal to raise $10bn secured investor offers of more than ten times this amount to breach the $100bn (£77bn) mark in a record for an emerging market debt deal. Orders tracked upwards to $85 billion by Tuesday, with pricing expected later Tuesday.

The order book for Aramco expanded from about $40 billion when the deal kicked off, people with knowledge of the deal said. In effect, Saudi Crown Prince Mohammed bin Salman, who runs the country day-to-day, is using the state oil producer's pristine balance sheet to finance his ambitions.

Books on Saudi Aramco's United States dollar bond offering have swelled to more than US$60bn, four investors told IFR on Monday. The offering also includes a three-year floating rate bond. But increased global investor appetite for the issue would reassure Aramco and the Kingdom that its appeal in worldwide markets remained as strong as ever.

Aramco has lined up a roster of global banks supporting its jumbo bond deal, another indication of how the mood in Wall Street toward the kingdom has changed.

JPMorgan and Morgan Stanley are managing the bond sale along with Citigroup Inc., Goldman Sachs Group Inc., HSBC Holdings, and NCB Capital.

Aramco is raising money as bond investors search for higher yields.

The bond, announced last week, follows on the heels of Aramco's agreement to buy a 70 percent stake in petrochemicals firm Saudi Basic Industries from Saudi Arabia's Public Investment Fund (PIF) in a deal worth $69.1-billion. Emerging-market bond sales have made a record-breaking start to the year, with issuance among all currencies already climbing above $600 billion, according to Bloomberg league table data.

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