Saudi Aramco’s International Bond Sale Tops $100 Billion In Investor Orders

Aramco’s bond debut attracts $30bn bids

The order book is set to be the largest ever seen in emerging markets, covering many times the $10 billion to $15 billion Aramco is expected to raise.

It said demand for the bonds soared in excess of $100 billion, or more than 10 times the $10 billion it expected to raise.

"Purely on figures, it is a fantastic credit", said Damien Buchet, CIO of the EM Total Return Strategy, Finisterre Capital. 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 previous year following the assassination of journalist Jamal Khashoggi.

Aramco's bonds have attracted demand from a wide range of investors, as state-owned Aramco's vast profits would put its debt rating - if unconstrained by its sovereign links - in the same league as independent oil majors such as Exxon Mobil and Shell.

The initial yield over U.S. Treasury securities looks to be barely more than those available for the sovereign's dollar bonds.

While the market knew the size was going to be big, "what is worth highlighting is that the quality is impressive - much better than the market had been expecting", said Mohieddine Kronfol, chief investment officer of Global Sukuk and MENA Fixed Income at Franklin Templeton Investments.

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

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Having made core earnings of $224 billion past year and with $86 billion in free cash flow at the end of 2018, Aramco does not need to borrow. And later in the bond market itself, where the Saudi government successfully raised debt this year.

The firm announced last month it was buying a 70-percent stake in SABIC from Saudi Arabia's main sovereign wealth fund, the Public Investment Fund (PIF), for $69.1 billion.

"It's not a surprise that the most profitable company in the world. on a debut global bond sale is capturing tons of investors' interest", said Aarthi Chandrasekaran, portfolio manager at SHUAA Asset Management.

Aramco a year ago postponed until 2021 an initial public offering (IPO) aimed at raising money for a government looking to cut its budget deficit and diversify its economy beyond oil.

"The short part of the curve, three and five years, will be strongly bid by locals and some Asians". The banks not only want to participate on the bond sale, but also ensure they're well placed in case the kingdom goes ahead with an initial public offering for Aramco.

Aramco said it will use the proceeds from the bond sale for "general purposes".

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