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Saudi Aramco Hires Banks for Debut Dollar Islamic Bond Sale

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·2 min read
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(Bloomberg) -- Saudi Aramco, the world’s biggest energy company, hired advisers including Citigroup Inc. and Goldman Sachs Group Inc. for its first dollar-denominated Islamic bond sale.

The state-controlled company may offer three tranches of notes due in three, five and 10 years, according to a person familiar with the matter. Islamic bonds, or sukuk, comply with the religion’s teachings, including its ban on interest.

The firm is raising cash to help fund its commitment to pay out $75 billion in dividends, a pledge Aramco made to drum up support for its initial public offering. But with the spread of the coronavirus and widespread lockdowns curbing demand for oil last year, the price of Brent crude plunged to just below $16 a barrel at one point in 2020, the lowest since 1999.

That prompted Aramco to reduce spending, cut jobs and sell non-core assets. The price of oil, Saudi Arabia’s main source of revenue, has since climbed more than four-fold to over $70 a barrel. And while the company’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.

The planned sale would its first since November, when it raised $8 billion from a non-Shariah compliant offering. Its debut offering of $12 billion a little over a year earlier was also hefty by Middle Eastern corporate bond standards.

More than 10 banks have been mandated to organize investor calls from Monday, Aramco said in a statement. They are: Alinma Invest, Al Rajhi Capital, BNP Paribas, Citigroup, First Abu Dhabi Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, NCB Capital, Riyad Capital, SMBC Nikko and Standard Chartered Bank.

(Updates with Aramco confirmation on sukuk sale and names of advisers)

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