Aramco gets whopping $100 billion demand for landmark bond

Aramco gets whopping $100 billion demand for landmark bond

Pension funds and insurance companies in the United States and Taiwan are traditionally interested in investing in long-dated securities to match their own long-term commitments.

The state-owned oil giant is marketing a USA dollar-denominated debt issue split into six tranches with maturities ranging from three to 30 years.

The deal is largely seen as Plan B to raise money for the country's economic agenda after the initial public offering of Aramco, which had been slated for 2018, was postponed until at least 2021.

The state company has insisted on its independence while meeting investors ahead of the bond issue last week, saying the Saudi government remained committed to Aramco's governance framework to safeguard its independence even when oil prices dropped.

Demand for the paper was the largest for emerging markets bonds since an orderbook value of more than $52bn for Qatar's $12bn bonds a year ago, and surpasses $67bn in demand for Saudi Arabia's inaugural bonds in 2016. An order book as large as $85 billion indicates that many investors that shunned "Davos in the Desert" are also planning to buy the bonds.

State-owned Saudi Aramco met investors last week in a global bond roadshow ahead of the issue, seeking to reassure them after the murder of Saudi journalist Jamal Khashoggi in October and a sweeping crackdown against dissent in the kingdom.

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Aramco's first foray into worldwide debt markets had previously been expected to raise around $10 billion, to be put toward the cost of acquiring the Saudi industrial conglomerate SABIC, valued at almost $70 billion.

The bond will create a USA dollar curve for the company, and also finance the US$69bn acquisition of 70% of Saudi Basic Industries Corp (SABIC), a petrochemical company from the kingdom's wealth fund.

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 is using the company's pristine balance sheet to finance his ambitions.

It would also encourage Aramco to go back to the bond markets at a later date.

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

Al-Falih said on Monday he hoped Aramco's acquisition of SABIC would be completed within six months. 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. 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.