Saudi Aramco to Bolster its Finances With a Multi-Billion Bond Offering

The world’s biggest oil producer Saudi Aramco announced plans to raise billions of dollars through an international bond offering. In a filing with the national stock exchange, Saudi Aramco said it hired a group of prestigious investment banks – namely Goldman Sachs, Citi, HSBC, JPMorgan, Morgan Stanley and NCB Capital –  to organize the bond offering.

This move will not cause many surprises given that Aramco is struggling to cope with the falling crude oil prices, which are trading nearly 32% lower year-to-end. Last year, Aramco raised $12 billion after receiving orders of more than $100 billion.

Earlier this month, the state-controlled oil titan reported net income of $11.8 billion and free cash flow (FCF) of $12.4 billion. As a result, the company reiterated its commitment to pay $18.75 billion in dividend for the third quarter after paying the same amount in the second quarter.

“We saw early signs of a recovery in the third quarter due to improved economic activity, despite the headwinds facing global energy markets,” Aramco President & CEO Amin H. Nasser, said.

“We continue to adopt a disciplined and flexible approach to capital allocation in the face of market volatility. We are confident in Aramco’s ability to manage through these challenging times and deliver on our objectives.”

In addition to the dividend payout, Aramco is also in need of funds to fund the takeover of Saudi Basic Industries (SABIC) in a deal worth more than $69 billion.

“In a world searching for yield, there should be no shortage of demand. But persistent low oil prices and the threat that poses to long-term cash generation should be reflected in pricing,” said Hasnain Malik, chief equity strategist at Tellimer.

Last week, the prominent credit rating agency Fitch downgraded Aramco’s credit outlook to “Negative” from “Stable” as the rating is “constrained by that of Saudi Arabia”. 

Saudi Aramco share price closed 0.28% higher today at 35.40 Saudi Riyal a share.

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