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Aramco Sells $6 Billion of Dollar-Denominated Islamic Bonds

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(Bloomberg) -- Saudi Aramco, the world’s biggest energy company, sold $6 billion of bonds Wednesday in its first dollar-denominated Islamic bond sale.

The state-controlled company sold sukuk due in three, five and 10 years, and the longest portion will yield 120 basis points above Treasuries, according to a person familiar with the matter. That’s down from initial discussions of around 160 basis points.

Order books for the sale were in excess of $60 billion, said people familiar with the transaction, who asked not to be identified as the details are private.

The firm is raising cash to help finance its plans to pay out $75 billion in dividends, a commitment that the oil company made to garner support for its initial public offering. Aramco had to reduce spending, cut jobs and sell non-core assets as the spread of the coronavirus and widespread lockdowns curbed demand for oil last year, the main source of revenue for Saudi Arabia.

Read: Aramco $75 Billion Payout No Problem as Oil Recovers, BofA Says

The price of Brent crude has rebounded, after plummeting to a 21-year low of just below $16 a barrel at one point in 2020. It’s since climbed more than four-fold to over $70 a barrel.

Oil Crown Jewels Are No Longer Off Limits With Deals Ramping Up

And while Aramco’s first-quarter profits soared -- thanks to the recovery in both crude and gas -- its free cash flow fell short of the $18.75 billion needed to pay the dividend for the period.

Aramco’s oil revenue accounts for about 40% of Saudi Arabia’s gross domestic product and the recent increase in crude prices may drive this even higher, Bloomberg Intelligence analysts Jaimin Patel and Damian Sassower wrote in a note Tuesday. Saudi Arabia’s plans to reduce its dependence on Aramco will be challenged by the nation’s fiscal deficit, they said.

Read more on Bloomberg Intelligence’s credit report on Aramco

(Updates with final pricing information throughout.)

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