Demand for Saudi Aramco's debut bonds at over $50bn: Sources

Sources say investors willing to buy bonds even if they end up getting a lower return than on Saudi sovereign debt.

    Last year, Aramco postponed until 2021 an initial public offering aimed at raising money for a government looking to cut its budget deficit and diversify its economy beyond oil [Ahmed Jadallah/Reuters]
    Last year, Aramco postponed until 2021 an initial public offering aimed at raising money for a government looking to cut its budget deficit and diversify its economy beyond oil [Ahmed Jadallah/Reuters]

    Saudi Aramco has received more than $50bn in bids for its debut international bond sale, which had been expected to be in the $10bn region, sources familiar with the matter said.

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

    One of the sources said demand had gone up to $60bn. That would be the highest order book value since a record issuance by Qatar last year, which attracted around $52bn in orders.

    Before opening the books earlier on Monday, the Aramco issue - which will be priced on Tuesday - had already attracted over $30bn in demand, Saudi Energy Minister Khalid al-Falih said. 

    People familiar with the matter told Reuters news agency that Aramco's vast profits - nearly three times those of Apple last year - meant investors were willing to buy the bonds even if they end up getting a lower return than on Saudi sovereign debt.

    Last year, Aramco 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 success of this bond issue will be the litmus test and a crucial precursor for the anticipated Aramco IPO within the next two years," said Salah Shamma, head of investment, MENA equities, at Franklin Templeton.

    Aramco met investors last week in a global roadshow ahead of the issue. The bonds, which range in maturity from three to 30 years, are expected to attract demand from both emerging markets and investment-grade buyers. 

    SOURCE: News agencies