Saudi Aramco has secured orders worth $31 billion for a new bond offering on international markets. The bond’s size is set at $6 billion.
In its first debt offering in three years, the Saudi energy giant introduced 10- and 30-year notes, with each attracting over $11 billion in offers, according to Bloomberg, which cited an unnamed source familiar with the deal. Additionally, the company offered a 40-year note.
Initially, the plan was to offer the 10-year bond at 140 basis points over U.S. Treasuries, the 30-year bond at 180 basis points over UST, and the 40-year note at 195 basis points. However, due to strong investor interest, the spreads were reduced to 105 basis points for the 10-year note, 145 basis points for the 30-year note, and 155 basis points for the 40-year note.
Early reports indicated that the bond proceeds would be used to refinance existing debt and support the investment program of the world’s largest oil company by market value and production. “Aramco is extending maturities as it will continue to gradually leverage up given their expansion plans and capex needs,” said the managing director of fixed income advisory at Union Bancaire Privee to Bloomberg.
SEE ALSO: How to Invest in Oil Commodity?
Aramco is a key source of revenue for the Saudi government, which has significant plans for economic diversification. The Saudi government directly owns 81.5% of Aramco, with an additional 16% held by the kingdom’s sovereign wealth fund, the Public Investment Fund. According to Reuters, Aramco plans to pay approximately $124.3 billion in dividends this year.
A month prior to the bond announcement, Aramco stated it would offer more stock to investors. This stock offering, priced at a discount, raised over $12.3 billion for the company. The initial proceeds were $11.2 billion, but an over-allotment option increased the total to $12.35 billion.