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Saudi Aramco Plans To Take Its Trading Arm Public

Saudi Aramco Plans To Take Its Trading Arm Public

Saudi Aramco, taking advantage of…

Saudi Offering Smashes Expectations Despite Oil Attacks

Saudi Arabia’s US$2.5-billion Islamic bond issued on Tuesday attracted orders worth more than US$13 billion in the first international debt issue since the attacks on vital Saudi oil facilities in the middle of September.

On Tuesday, Saudi Arabia sold US$2.5 billion worth of Islamic bonds, or sukuk, returning to the bond market to take advantage of the low borrowing costs in hopes of replenishing its government coffers as persistently low oil prices depress revenues.

The ten-year bond was priced at 127 basis points over the benchmark midswaps, down from a guidance of 145-150 basis points over the midswap rate, due to the strong demand, Bloomberg reports.

Investor demand for Saudi Arabia’s Islamic bond was high, even after the September 14 attacks on critical oil infrastructure that knocked more than half of Saudi oil supply offline.  

In recent years, the Kingdom has borrowed a lot of money on the international bond markets to offset the lower government oil revenues, on the back of low oil prices.

In July this year, the Saudis issued a debut Eurobond of US$3.3 billion (3 billion euro). Since its first foray into international bond markets at the end of 2016, the Kingdom has raised as much as US$60 billion in international bond issues, according to Reuters estimates.

Related: Oil Rebounds On Rare Market Optimism

The latest bond issue comes as Saudi Arabia last week delayed, yet again, the much-hyped listing of its oil giant Aramco by at least several weeks.

The main stumbling block has been that international investors are not really buying the Saudi insistence that the biggest oil company in the world is worth US$2 trillion.

At a meeting to endorse the initial public offering (IPO) last week, the banks Aramco has hired for the listing made clear that foreign investors are not rushing to invest in the Saudi state oil company at a valuation of US$2 trillion. According to Bloomberg sources, the valuation should be closer to US$1.5 trillion if Aramco wants to stir real interest among international investors.

By Tsvetana Paraskova for Oilprice.com

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