Dubai: Saudi Aramco, the world’s most profitable company, has received bids of $100 billion (Dh367.2 billion) for a $10 billion bond issue, with indications that pricing would be tighter than Saudi sovereigns, according to sources.
The bonds, proceeds of which would go for the acquisition of Saudi Basic Industries, will be priced at close of New York trading. The bonds were available in 5 maturities between 3 to 30 years with an initial guidance of 75-175 basis points over US treasuries.
“I’m not surprised that the order book is so strong because its credit rating is strong, and yield levels are those of single A, and that makes it an attractive proposition,” Anita Yadav, Head of Fixed Income Research, Senior Director, Wholesale Banking at Emirates NBD, told Gulf News.
The company started with its investor meeting from April 1, the company said on a day when they announced $111.1 billion in profit last year, which is equivalent to the net profits of Apple and Alphabet combined.
The spread on Aramco has come tighter than Saudi sovereigns.
“Demand has been so high, so the technical force of demand being higher than supply has resulted in tighter guidance than Saudi sovereigns,” she added. Market was earlier expecting a wider pricing by 0-20 basis points than the government bonds.
“Many investors have been underweight Saudi Arabia in anticipation of this bond deal and are likely using it as an opportunity to close this off or even move overweight Saudi Arabian risk in a supportive environment of rising oil prices,” Tim Jagger, Head of Emerging Market Debt at Columbia Threadneedle Investments, told Gulf News.
Oil prices have gained as much as 31 per cent to hit their peak of $84, their highest level since 2017.
Saudi Arabia will likely account for 4 per cent of the JPM EMBI Index by the fourth quarter of 2019 “so Aramco is likely to be a core holding for many investors, particularly as many regard it as a superior risk to the sovereign as indicated by final pricing being through the Saudi curve,” Jagger said.
Yadav said Saudi sovereign curve is expected to tighten on the basis of strong Aramco bond pricing. Saudi 10-year sovereign bond traded at 117 basis points, tighter than 139 basis points seen a few weeks ago. GCC sovereigns may tighten 5-20 basis points after Aramco bonds get listed in the secondary market.